Tips when Applying for a Loan
We’ve all had our hearts set on something, whether it was remodeling the office or purchasing new equipment for the business…there are just times when getting a loan is appropriate. There are also times when this can feel a bit like a gray area too. When inspiration hits, reality is soon to follow. A cornucopia of questions begins to do their handy work on you at night… Can the business afford such an investment? Is my business plan solid? Would there be any drawbacks? Is the timing right? The most direct way to answer all these questions is to get familiar with your financial position. Investigate these top considerations first…
Credit Score Health
While perfect credit is not necessary to get a loan, your chances of getting a lower rate for timely payments will be greater. A lender’s opinion on what “good credit is” varies, right along with that repayment plan. So, a good place to start is checking with one of the three most trusted credit bureaus, Equifax, Experian, or TransUnion. (A free credit report is available once every 12 months.) With these three bureaus you can request your credit score, get reports on account history, and verify and protect your identity as a borrower.
At the risk of sounding like that Ol’ broken record, make sure you have sufficient income to repay your lender. This means, re-examine your businesses income and budget plans…even if you recently did this just a few months ago. It’s easy to forget how those few extra expenses can add up! The approval of your loan application weighs heavily on whether or not you can sustain a repayment plan. Lender’s will also have information available to check the minimum income eligibility criteria, take advantage of this.
Get familiar with the fees…very familiar
Aside from the known principal and interest rate which comes with loans, there are also (and potentially many) additional fees. Take the time to examine your loan carefully and stay vigilant for any hidden or dormant fees. Some loans appear to be fair because of their lower interest rates, but then “make good on them” later for other stipulations in the agreement. Be sure to ask yourself (and the lender) …a few times, “So, what’s the total cost of this loan?”
In the end, the amount of research and time you spend on getting a good loan with a good lender, is always key to a happier, more functional business. Also, give thedigitalCPA a call for some stellar advice. It’s our mission to help a business thrive…and it’s our favorite things to do!