If you’ve made the decision to apply for funding to fuel your business, congratulations! The right funds may help you put your foot on the accelerator and power up your enterprise.
Depending on the loan product, you might be able to use funds for working capital, to refinance expensive debt, and more. New equipment, additional products, increased marketing, and hiring may all help you reach your growth goals.
Once you’ve decided to seek outside funding, there’s an important detail to nail down. The loan provider you want to work with. This article may be able to help you narrow down your options and find the right fit.
Types of business loan providers
The good old fashioned bank used to be the only place to go for a loan. These days, there are many types of lenders offering a variety of loan products. Here are some popular lender types.
Traditional banks
A traditional bank is characterized by physical locations where customers can visit to access financial services, and interact with staff in person. Traditional banks must have a registered headquarters and a government license to operate.
Credit unions
Credit unions are not-for-profit organizations that serve their members. Credit unions typically provide a host of financial services including lending. Credit unions are member-owned, cooperative institutions, generally seen as a safe place to save and borrow at reasonable rates.
Online lenders
Online business lenders generally offer a 100% online application experience - no faxing required! Although any lender can use an online application, online business loans are usually offered by financial technology (fintech) companies, not banks. Online business lenders generally have more flexible qualifications and streamlined underwriting processes than traditional lenders. However, they sometimes charge more for the digital convenience.
Why choosing the right business loan provider matters
Seeking outside funding for your business is a big decision! And big decisions can often become stressful. After all, during the application process, you’ll be taking a deep dive into your business finances and producing a fair amount of paperwork. You might even face deadlines. The right loan provider can help alleviate anxiety and guide you through the process.
How to choose the right business loan provider
With so many lenders offering different loan products, it can be difficult to compare and contrast to find the best fit for your business needs. The information below may help you determine what’s important for you during the loan application process.
Evaluate reputation and credibility
Between word of mouth, social media, and reviews it’s generally hard for any business to hide behind the curtain. Take a look at what others have to say and do some due diligence on your own to assess the types of people you’ll be working with to get the funding you need.
Do your research to ensure that you are getting the best possible business loan for your particular circumstance.
Approval time
Approval time is often critical to a business owner, especially if there are initiatives that immediately require funds. You don’t want to miss out on a good business opportunity because your lender is dragging their feet.
Before you start the process, ask the lender how long, on average, it takes for a loan to get approved and ultimately funded.
Transparency
The lender you choose should quickly and efficiently share matters that are relevant to their customers. Typically, a transparent lender will clearly disclose loan terms, fees, and annual percentage rates. Another important part of transparency is to be honest about the evaluation criteria used to process your loan. Failure on the part of a lender to disclose this information may hinder your ability to understand the application. In short, transparency helps to enhance the customer experience.
What is the total loan cost?
A loan’s interest rate is important, but it doesn’t tell the whole story. There are other costs attached to a loan agreement you should consider. These include:
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Loan amount
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Interest rate / Annual Percentage Rate (APR)
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Loan term
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Loan fees
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Administration costs
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Prepayment penalties
All of these costs affect the lump sum of money you’ll get when your loan funds. If you miscalculate, you may end up missing out on business opportunities.
Compare lenders
Finally, don’t put all your eggs in one basket. Research several lenders to help you make the best choice. Your goal should be to get the right loan using an easy-to-understand application process. The time to fund might also be important to you so consider that as well.
Bottom line
It can be a daunting task to research lenders before settling on the right one. Make it easier on yourself by getting loan-ready.
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Get your finances in shape. A low Debt-to-Income (DTI) ratio will typically help you qualify for the best loan rates. DTI shows how much of your business's monthly earnings go to repaying your existing debts. The DTI is one of the measures used by lenders when deciding whether to provide your business with a loan.
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Check your credit score. Business loan providers generally consider a credit score that falls somewhere between 640 and 700 to be good. Generally, the minimum credit score for an SBA loan is around 650 and around 660 for a term loan from a bank in the SmartBiz® network.
- Choose the loan that’s right for you. From an SBA loan to a term loan to a line of credit and more, there are many options. Do a little homework before you research lenders so you can get the most bang for your buck.
SmartBiz is the leading AI-powered financing platform connecting small businesses with SBA, bank term loans, and flexible financing options. Simply tell us about your business and goals, and our technology will take care of the rest. No faxing, printing, or mountains of paperwork required. You’ll be in good hands with our financial professionals who will work with you every step of the way and help answer any questions that you may have.
Bill Lyon or Serum Products, LLC® had this to say about his experience with SmartBiz:
“I would highly recommend SmartBiz if you are looking to obtain any type [of] financing, especially SBA funding. They are great!!!”
See if you pre-qualify for up to $350,000 in 5 minutes. No impact to your credit score.*
