If you’re looking to borrow money for your company then you will need to obtain a business loan. However not all loans are created equal and it is important to know certain things you should watch out for when you are going through this process. If you are uncertain of how to find this information in the loan agreement you should seek professional assistance before agreeing to anything.
Variable Interest: one thing to be very careful of is variable interest rates. Sometimes lenders will entice new borrowers by offering a low introductory rate. These rates will change over time and having this durable rate can be very disruptive to your day-to-day business operations. Make sure that your loan has a fixed interest rate in order to keep your finances as stable as possible. This is especially true for new borrowers or for companies that are just getting started.
Prepayment Penalty: although there are scheduled payments there are times when you would be better served paying off your loan quickly. Certain loans will have what is referred to as a prepayment penalty, which means you will have to pay a fee for paying off the loan earlier than scheduled. In less there is a very compelling reason to do so I highly recommend that you avoid any type of loan agreement which penalizes you for early payment.
Hidden Fees: next there is the question of hidden fees on your loan. Remember interest is not the only thing that you must pay in addition to principal. Many loans will have some type of additional fees either at the start of the loan as some form of origination fee or also some type of loans will have yearly fees as well. Make sure you understand the total cost of obtaining your business loan before signing any of your agreements.
Disreputable Lenders: to round out our list we should discuss the issue of disreputable lenders. There are many people who are willing to lend money to companies and not all of them are trustworthy or well-established. If you feel in any way that you are dealing with a company that is not altogether aboveboard I recommend that you researched on the Better Business Bureau website to see if there are complaints lodged against them. If a company has a number of unresolved complaints chances are that you will also have issues with them and you should avoid this company and try to deal with companies that are more reputable.