So, you applied for a business loan and have received multiple offers. How do you compare the loan offers so you choose the right one for your business? It can be confusing to compare them and what to look out for so today we will go over what factors to consider when you are comparing business loans.
The overall cost of the loan needs to be compared to help you determine how much working capital it will cost your small business overall. For example, if you have a business loan that is $15,000 plus interest and fees that total $2,000, the total cost of the loan is $17,000.
The following terms are involved with the overall cost of the loan:
The rate at which how quickly you can receive funds is important. Some loans will be faster than others. For example, an SBA loan may take a few weeks to several months to fund. Although they have one of the lowest rates, the funding process is a lot slower, so it is not a good fit for you if you need funds right away. On the other hand, a merchant cash advance can be funded as little as one day.
The size of the loan is the third factor to look into when deciding which offer to take. Depending on your business needs, you will need to see what amount is sufficient for your business. If you take on too large of a loan, you may not end up using it all and if you take on too small of a loan, you may need additional capital and will need to go through the application process again to get the additional funds you need.
After you take the three factors discussed above into consideration, you will have a better idea of which is the right choice for your business. Know how to weigh your options so you will make the most informed choice by prioritizing what your business needs the most. Take your time, be patient, and carefully evaluate your options before proceeding too far into the process.