Comparing Business Loans: What Should You Look Out For?
Michael Foote is the Founder and Managing Director of cost-comparison site Quote Goat, which compares the costs of both personal and business financial products.
Below, Michael delves into business loans and the most important things you need to be mindful of when applying for one.
When you make the decision to apply for a business loan, the first thing you will notice is the vast amount of choice available to you. This can be extremely confusing if you are not sure what type of loan is suitable for you and your business. Thankfully internet comparison sites can offer a fast and simple process to compare loans and match them to your specific criteria.
Before you begin you must decide:
- What is the purpose of the loan?
- The amount you would like to borrow.
- The period of time you can comfortably pay it back.
- What annual percentage rate (APR) are you comfortable with?
- That you have taken into account any additional fees.
Once you have nailed down these specifics, it is time to start looking.
Taking out a loan is a big commitment. Make sure you are borrowing from a reputable lender. A background check is a good way to start. You can typically find customer reviews online that should help inform your decision. Obviously, the best and most efficient method is to use a respected online comparison site to ensure the hard work is done for you.
Clear and simple language
Applying for a loan is daunting enough given the huge number of lenders offering finance at different rates. Then you have to make sure you pick an appropriate payment schedule. Once this is all done, then you will have to check the terms and conditions to make sure you haven’t overlooked something that might come back to haunt you. It is the duty of a loan provider to make sure the information you receive is clear and accessible. If you don’t understand something, make sure you ask for clarification.
Different loan providers offer different payment schedules and lending terms. Traditional loans are paid over a set period of time on a daily, weekly or monthly basis. However, there are now a variety of lending options that are more tailored to the specific needs of borrowers. Merchant cash advances, for example, are calculated as a percentage of a business’s daily card taking and automatically repaid. Invoice finance is another form of lending that can quickly increase business cash flow. A lender can pay you a percentage of the value of your business’ invoices upfront, in return for a cut of their worth.
Look out for hidden charges such as early, late payment or even processing fees. If you are not careful these can substantially add to the cost of your loan repayments. If a fee was not explained to you by your lender, make sure you contact them to challenge the charges via the Consumer Rights Act. This legislation protects your rights and makes it easier to contest hidden fees and charges. If this fails you can always seek redress with the Financial Ombudsman Service (FOS).
To find out more, visit: https://www.quotegoat.com/business-finance/