Times have changed, which means that you no longer have to feel left out if the traditional financing institutions reject your application for a business loan. But with so many options to choose from things can get a bit tricky. Here are five features that are important when it comes to choosing a business loan that is right for you.
Know your options
Lenders understand that small businesses play an important role in the Australian economy as they account for 93% of all Australian businesses by turnover. Small businesses account for 33% of the country’s GDP, but when it comes to financing needs these businesses differ. Therefore, there are an array of financing options that you can choose to finance your business according to your businesses needs. There are loans such as vehicle finance, equipment finance, business overdraft, a business line of credit and more to finance each segment of your business. Choosing the right type of loan is the first step to getting your business to move and grow.
Secured or unsecured
One of the things you will have to compare is whether you want your loan to be secured or unsecured. Secured business loans mean that you will have to provide an asset that can be used a security against the loan which can also help reduce the interest rate that you pay on the loan. An unsecured business loan doesn’t require security, but they tend to come with high interest rates. You need to be careful in terms of what you choose to offer as security as this could be repossessed to pay off the loan if you are no longer able to meet payments.
Choosing between a fixed or variable interest rate can affect your business loan repayments. Therefore, you need to choose something that blends well with the budget and cash flow requirements of your business. However, to know the true costs of a loan it is important that you look at the comparison rate which is expressed as a percentage that takes into account the loans ongoing costs, fees and charges.
Flexible repayment structure
It is vital that you find something that works with your businesses cash flow. If you are a seasonal business, you will need to check if your loan allows for flexible repayment structures that consider the fluctuation of your cash flow. Repayment structures generally work on a weekly or monthly basis with most lenders which is something that you need to consider before taking out a business loan. Keep in mind that you want a repayment structure that will give you enough room to breathe.
Seeking professional help
Choosing the right financing solution can be confusing and at times intimidating when the progress of your business relies heavily on the decision you make. Seeking professional help from consultants or brokers can make the process less daunting, and the beauty of this is that most lenders offer their services at no cost to you. Such people can help you throughout the loan process of finding financing that is designed to meet your needs.
Before you sign the dotted line always keep in mind that your business is not the same as the next. Although one financing solution might work for one type of business it might not work for you.