There are entrepreneurs who start their businesses with the
purpose of seeing their ideas come to fruition, to prove their worth and make a
profit on the side. Unfortunately a lot
of them rush into making business loans without reading the fine print. This may be because they were never into
finance in the first place or that they find money matters a
little too trivial compared to “the next big thing” they have up their sleeve
or that they are just too eager to start the business, they will accept any
deal being offered them.
The truth of the matter is that there are a lot of small
business owners who discover that they could have done things differently when
it comes to their small business finance dealings.
Total Loanable Amount
The estimated budget for any business project should at
least fall well within the value of the collateral and not substantially below
it. If the small business finance
facility does not require collateral, then the loan amount should come close to
what is needed and it is important not to go overboard either.
Revolving Credit Line
Remember that you still pay interest on and excess cash from
the loan. If you wish to have a revolving capital and would want to pay
interest only for the loan amount actually being used get a credit line
facility instead of a lump sum loan.
Penalties and
Surcharges
Small Business Finance services have fixed interests, which
are what you pay for the temporal use of other people’s money. But before
signing and agreeing to anything, pay close attention to the penalty rates and
surcharges. Everyone thinks positive and
hopeful at the threshold of a new venture, but the wise prepare for any
eventuality. Inquire about the extra
charges in case you fail to meet an amortization deadline. Let the reality sink
in first especially of the collateral is something you value.
Amortization and
Interest
When aspiring entrepreneurs are presented the initial
computation for the small business finance facility, they tend to look at the
monthly amortization often ignore the total debt amount. It is usually
presented by the small business finance provider after the loan is approved and
the documents and promissory notes are prepared for signing. Remember that if
the loan interest is at 2% per month, it is 24% a year and 96% in 4 years. That
is almost double the amount of the loan amount.
Alternatives
Small business finance sourcing do not have to come from
traditional financing institutions.
Inquire about Merchant Cash Advances, Business
Cash Advance and Unsecured Loans.
These alternative financing
models may be better suited for your needs.
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