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5 Things to Consider When Choosing the Right Small Business Lender

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Are you planning on starting your dream business? Is your existing business facing a cash flow crisis? Is your business not having enough money to cover payroll and other operating expenses? Or does your established business need upfront funding to develop a new product, purchase real estate or expand its facilities? There are a variety of reasons why business owners might be thinking about applying for a business loan from a small business lender.

With a large number of lenders and investors available in the market today, choosing the one who can give you a quick and easy way to get a business loan is always a challenging and time-consuming endeavor. If you Google, “The best small business lenders”, you will be welcomed by thousands of websites claiming themselves the best small business lenders. Since the loan decision depends on several factors, how to decide which lender is the best for your business?

Are you a small business owner in any part of the world who need help finding the right financing resources for your business? You’ve landed on the right place. In this post, we will briefly discuss top factors to consider when choosing the right small business lender. After reading this post, you’ll be able to find a trusted lender who can help you with all your business’ funding needs.

Identify Your Need

There are multiple types of small business funding options available, the possibilities vary depending on your business needs. For example, you pay your employees semimonthly, but this month you don’t have adequate funds because customers haven’t paid invoices for the last two months. Though your business is healthy and growing, it’s okay to get invoice financing to cover short-term cash flow shortage in this situation.

Before you start exploring different financing options, consider why your business needs one in the first place. Are you looking for some extra cash for short-term cash flow shortages? Are you planning to make large investments that will create new growth? Or do you have enough in savings to cover an emergency expense? It’s crucial to first determine why you need the extra capital for.

Besides that, you also need to ask the following questions before you apply for a business loan.

  • How much money I am looking for?
  • How soon do I need the funds?
  • What does my credit profile look like?

Research and Compare Lenders

Nowadays, there are more options than ever to get a business loan, and many of the lenders can be found with just a few clicks on your laptop or smartphone. Here are the main types of lenders:

Online Lenders

Small and medium-sized businesses can rely on online lenders for quick and easy business loan approval. There are numerous online lenders who can provide fast, affordable small business loan tailored to client’s needs. Online lending marketplace connect you with multiple lenders, help you choose the one that’s the best fit for your business.

Direct Lenders

The direct lenders to the SMEs are commercial banks and credit unions. While brokers typically are licensed to operate in just a few states, most direct lenders may operate in all the states. The top best direct lenders for small business funding are Chase, Navy Federal Credit Union, Axos Bank, Wells Fargo, JP Morgan, and Citibank.

Peer-to-peer Lenders

This is a platform that helps small business owners borrow directly from other individuals through online organizations like Peerform and Funding Circle.

Local Community Banks

Locally owned and operated, these financial institutions tend to focus on the financial needs of the local businesses.

Once you are done searching, make some solid comparisons. What kind of programs they offer? What is the best interest rate being offered? How long are the terms loans? Is there any hidden financing fees?

The credibility of the Lender

This is one of the most vital elements you’ll need to look at when finding the best lender for your small business. When screening your favorite lenders, make sure they have upfront loan terms, a physical address, and an official website.

If you are searching for small business financing options for the very first time, then it might be worth doing a search online to check the credibility of the lenders. Since customer’s stratification is a helpful way to find a trusted and reliable lender, it’s the best idea to look at their websites and social media channels for consistent and positive customers’ testimonials and reviews. Also, look for a high rating from the Better Business Bureau and industry awards & recognition.

Besides that, you can also speak with your friends and family members who may have borrowed money from a lender in the past for their business’ financing needs. If you don’t know any lender via word of mouth, then make sure you ask the lender for references that you can ask them about their experience with them.

Available Interest Rates

The interest rate is one of the first things you thought about when deciding for a lender. It’s important to see available interest rates because it will determine how much you officially end up paying for a loan. If you’re qualifying for a business loan with low-interest rates or accessing to a specialty loan (such as an SBA loan), the total cost of the loan will be relatively lower.

When evaluating interest rates, look at the rate you’ll be given instead of that’s popping on bank’s websites. Your actual rate of interest depends on several factors such as credit history, the kind of loan you’re getting etc. In order to make sure you are getting a competitive rate, compare different options before making any decisions. Working to improve your business credit score can help you borrow money with low-interest rates.

Simple Application Process and Flexible Payments

Go for a lender who has a streamlined loan application process. It’s better to choose online lenders because they will require less paperwork than traditional bank loans. Lenders take a gander at something beyond your business financial assessment. They like to see an applicant’s full profile when choosing whether to affirm for a credit or when setting the interest rate. You may be required more documents for a larger business loan, an experienced lender will simplify the application process. They help you approve the loan faster while frequently decreasing the number of loops your business is required to bounce through.

The last thing you’ll need to be aware of is a hassle-free payment option your lender provides you.  Will they give you the flexibility of paying daily, weekly or monthly? How much you will have to pay for late payments? Take time to understand your payment schedule and the lending term. The best lender makes repayment simple for you, set up for automatic payments. It eases the burden of remembering the date to pay the loan amount.

Final Thoughts

If you’re running a small business, you’re going to need finance to take your best to the next level. Before finalizing a financial institution, consider what exactly your business needs are and what each bank can offer you. Also, do proper research, look for different options and go with one who can successfully meet your unique financial needs.


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