What Small-Business Loan Will Work for You

You know what it is like to have offers of financing for your small business. You have every right to be skeptical. Rob Stephens (CPA), the founder of financial planning company CFO Perspective, says, “Don’t trust what the lender claims on its website.” “Companies keep popping up that aren’t lasting. It would help if you had a lender that would offer excellent service over the term of your loan. (And not take your Social Security number and contents of your retirement account. Talk to financial experts to learn how to find the right loan for your business.

Start with SBA. Check out the website of the Small Business Administration. While government loans are often offered at lower rates and with longer repayment terms, it can be complicated to get one. Keith Chulumovich (CPA, managing director at O’Keefe Financial Consulting Company) says that obtaining one can take a while and involve a lot of bureaucracy. “Many programs take considerably longer than banks,” he said.

Refer friends. It is essential to look at at least three options for a loan from different sources. First, Chulumovich says to consult with an accountant or attorney. They’ve seen thousands upon thousands of loans — some good, some bad–and can direct you to reliable lenders, sources for grant money, and community credit programs.

Do your research about internet lenders. You will find many sites on the internet that have low promise rates but misrepresent themselves as loan platforms, registered loan agents, or lending platforms. Scissons advises not only to look out for fraudsters pretending to be legitimate lenders.

Visit the Enforcement Actions Search Tool of the U.S. Office of the Comptroller of Currency, or the Better Business Bureau, to search for litigation related to the lender. Google searches for “[name of the lender] reviews” will show you other users’ experiences on sites like Reddit. Most states have websites that can verify whether the company was legally established in the United States. (A company’s financial records will indicate which state.

Compare all your loan options. Scissons states that the common mistake is to focus on the interest rates. Instead, she suggests you consider six things: the number of funds available, any additional fees, term lengths, collateral requirements, and reporting restrictions. In addition, she says, “Repayment terms vary for each loan.” Is it possible to repay the loan earlier? Do you have to pay principal and interest all the way through, or do you have to make large principal payments at the end? Make a chart and rate each option from 1-5.

Assess the potential consequences for your company. Before you sign the contract, take the time to review the monthly effects of the loan on your business operations and bank accounts. Kirsha Campbell CPA, president of The Cash Lab business accounting consultancy, says, “Acknowledge its impact on your company.” This includes liquidity, solvency, cash flow, and the logistics for paying the loan each month. Sometimes, you may find that one platform is incompatible with your bank’s system or that the quarterly repayment schedule better suits your cash flow.

Consider a lender who offers many business services. A relationship with a banker who can work well with businesses can prove to be very beneficial. It can give you access to a variety of financial services and unrevealed benefits. You will often get the best rates, and your loan wait time can be reduced to as low as a few weeks. Stephens states that you want someone willing to be patient with you during difficult times.