It is important to ask the right questions to a potential small business lender is critical to finding the ideal financing arrangement. By asking the right questions, you will be able to know how to spend your working capital, save money and more.
In this post, we are going to list the important questions you should ask your business loan lender. We’ll explain why it’s crucial that you get the right answers to these questions.
What’s needed for the business line of credit or loan application?
The lender will have documentation to show you so that you know what you need for your loan application. Even if you have the document, you should still ask this question to your lender. They might have additional information to share so that you have more insight into their application process.
They might have additional prerequisites to use to evaluate loan applications such as year in business or how much you make in sales each month.
How long does it take to get approved?
The duration of time between loan application submission to loan application approval varies considerably from lender to lender. It varies even more if you’re looking at different types of loan products. An approval on a business loan from a traditional bank can take one month or more while a merchant cash advance can be granted in a week or less.
Are there any restrictions on fund usage?
If there are any restrictions on what you can and can’t use your funds for, you must know this. You don’t want to sig n a loan agreement and find out that you can’t use the funds the way you had originally planned.
How long does it take for the funds to be released?
Try to get a specific timeline as soon as you can so you can plan properly. As you move along the loan process, ask the question again since the lender may provide a more precise timeline.
Is prepayment allowed?
Certain lenders charge high fees if you pay your loan early. Make sure that you ask if a prepayment is allowed and what the fees will be if you prepay. Keep in mind that some lenders offer discounts for early payment.
How does the repayment process work?
The details of your loan repayment process have such a significant impact on cash flow that you literally can’t afford not to know how repayment terms works.
How does your renewal process work?
You’ll find a business financing lender that you want to work with again. Maybe you’ll need to borrow additional money for projects later on. Depending on the online lender, you can renew your business loan to access additional capital before (or after) your loan balance hits zero.
Do you lend to other companies in my industry?
Ask the lender if they have worked with anyone else in your industry and how it went. You will have better experience working with a lender that understands the intricacies of your industry.
Will my repayments be reported to the major credit bureaus?
Most business lenders do report your payments to the major credit bureaus. Still, you should ask your business lender to be safe. A loan on which your repayments are reported to credit bureaus is preferred.
When is the first payment due?
The first payment on a loan can vary. If you have a monthly payment schedule, you will make your payments on the same day each month.
Your first payment is typically on the first business day after you’ve received loan funds.
The Bottom Line
The fact is the best questions to ask your business lender also depend on your unique situation. Go further and think carefully about your situation and what potential complications you might need to clear up.