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Tips for Selecting the Best Small Business Loan Many small businesses face major hurdles in securing business loans primarily because of strict lending standards set by banks. But getting financial help from outside is often crucial for growing or starting a business, or even paying for regular expenses like payroll and inventory. While it can be a challenge to find, apply for and get approved for a small business loan, it’s best to always be prepared. There are several factors you should take into account when selecting a small business loan for your enterprise. Loan amount
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The amount of loan you’re looking for will affect the terms of repayment, interest rates as well as other relevant conditions attached to your loan. If you need a huge loan amount, you may need to have a deposit before you’re approved for the loan. Carefully think about the amount you want to borrow. Never underestimate the amount you’ll need because it’ll be even harder to get another loan if you find out that you need extra funds.
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Duration of repayment The duration of your repayment schedule will be based on the amount you borrow. Small loans often need to be repaid within the first 1-2 years of trading, while bigger loans might need 15 years to be repaid. The longer the period of your loan repayment schedule, the less cash you will repay in regular installments. However, if your repayment schedule spans a number of years, you could incur ongoing fees or added interest rates, which can make your loan more expensive in the long run. Fixed or variable Fixed loans commit the borrower to a fixed interest rate and certain repayment plan. In contrast, flexible loans have fixed or variable interest rates along with a repayment schedule that can be personalized to meet your business’s needs. While fixed loans can give you the freedom of knowing the exact amount of money you’ll need to pay off, flexible loans tend to be the more cost-effective choice. Before you choose between a flexible and fixed loan, consider the pluses and minuses of each kind of loan. Lender Choosing a lender that’s well known to the authorities is the best way to stay away from scams and deceitful marketing tactics. Whether you opt for a building society, bank or other small business lender, thoroughly assess their credentials before applying. Responsibility Partners and sole traders are personally liable for paying off a business loan, irrespective of how a business performs. It’s vital to consider the financial and legal implications of assuming personal liability for a loan, because it could result in loss of property, personal possessions or assets. Compare different loans Before finally settling on a loan, it’s advisable to compare the different terms and repayment schedules of different lenders. Take your time to ensure you’ve picked the best deal that suits your circumstances and needs.