If you’re on the way to starting your own business, you will most likely need a commercial loan in order to get the ball rolling. Starting up a company can be expensive and while it may require you to borrow or invest some money in the beginning, entrepreneurship definitely has the potential to pay off big in the long run. Before meeting with any prospective lenders, it is crucial that you know everything about how your business will operate, how much money you will need to borrow, and especially how much profit your company will have the likelihood of creating. This way you can answer any possible questions the lender will have, and ensure them that your business is going to be successful. Any lenders will be much more willing to spot you money if you can prove that your company is going to yield favorable results. It is also wise to familiarize yourself with current market trends and how lenders work so that you can get the best possible loan at the best possible rate.These are five secrets that most commercial lenders won’t tell you:
1. It’s a good idea to shop around to find the best deal— If you’ve got a good idea and you’re sure of your company’s success, lenders will be more than willing to back your plan. Because of this, it’s important that you visit multiple lenders to see where you can get the lowest possible interest rate.
2. Long term loans are usually better for fixed interest rates— A fixed, stable interest rate is best for a loan that is going to take longer than a couple of years to pay back. This is because you won’t have to worry about rising interest rates that will keep changing over time. A rate that is constantly changing will be hard to keep up with.
3. Short term loans are typically better for variable interest rates— Short term loans on the other hand are better used with variable interest rates. This is because the rate has the possibility of decreasing. While the rate also has the chance of increasing, you will only be subjected to this rate for a short period of time due to the nature of the loan, and it’s worth taking the small risk at the chance of getting a better rate.
4. It may not be an ideal time in the market to take out a loan— Sometimes lenders will be reluctant to tell you to wait on taking out a loan. If they can get your business at that moment and are confident you will have the ability to pay them back, they most likely won’t turn you away, even if they suspect interest rates will drop in the near future. Because of this, it may be a good idea to track interest rate trends for a period of time before deciding to get funds from a loan.
5. You may not need the loan in the first place— If a lender thinks there’s an alternative way to get the funds you need, but you can provide them with good business, they most likely will not enlighten you.
Now that you know the truth, you’ll be better equipped to get through the lending process successfully.
Jason Bengert is a professional blogger and works at Park Place Equity. He is a fun loving person and his areas of interest are finance and technology. You can connect with him at Google+.