Many times, a business loan is the difference between success and failure for a business. Unfortunately, one of the trickiest things to accomplish is finding the best loan terms that work for you and your business. Due to different factors, such as over-saturation in certain industries, the competitive lending environment can make it hard to find a reasonable loan that fits your needs. But it’s not hopeless.
Here are four tips for securing good business loan terms so you’re not stuck with an unfavorable deal.
Arm Yourself With Information
Before you even contact a lender, make sure you have all the necessary information at your disposal. This includes both personal and business documents such as tax returns, credit reports, business plans, etc.
Why? First because knowing this information will help you to determine what kind of loan you actually need. Second, if you’ve taken the time to pull all your documents together and have gone ahead with a credit report for your business, lenders may be more likely to take you seriously since you have taken initiative.
Don’t just go for the first lender that offers you a loan. Although this might be tempting, take the time to shop around and compare several lenders as different lenders have different policies and one may work better for you than others. For example, if you are looking to finance an assisted living facility, consider lenders who specialize in real estate loans.
So ask for quotes from several different loan sources and compare the fees, terms, interest rates, and repayment schedule.
Be Prepared to Negotiate
When meeting with lenders, be prepared to negotiate. Remember, even though lenders are in the business to make money, they also need borrowers to stay afloat. So where appropriate, ask for a better deal than what you’re originally offered and be willing to walk away if it doesn’t meet your needs.
If you don’t feel comfortable negotiating on your behalf, consider hiring a lawyer or other professional negotiator to do it for you.
Being impatient is one of the easiest ways to get stuck with a bad deal. Don’t be tempted to sign any loan agreement until you fully understand the terms of the loan and if they are in your best interests.
For example, say you are offered a loan with a lower interest rate but a longer term. Before you sign, make sure you understand what the total costs will be over the life of the loan and how it fits into your overall budget. You also want to read the fine print on any agreement so that you are aware of additional fees or late payment penalties that may arise.
Getting good business loan terms isn’t always easy, but it is possible with the right approach. By arming yourself with information, shopping around for the best deal, being prepared to negotiate, and taking your time with each decision you make, you can increase your chances of getting a loan that works for you.