Are you determined to take your business to the next level in 2023 -- perhaps by bringing in more equipment and even hiring more workers? That means you need money. And fast.
Fortunately, that's where business loans can come into play.
Research shows that loans for small businesses average between $5,000 and $200,000, with the overall average being $80,000.
Finding the right loan to finance your business, though, requires knowing who can offer it. Here's a rundown on how to choose a business loan provider.
Let's jump in!
Choose a Business Loan Provider Who Works in Your Locale
As you search for a business loan provider, make sure that your target lender will work with you in your geographic location.
You can start by speaking with a local credit union or bank lender in person. If your business already has a physical location in your community, the lender might already be aware of it or even patronize it. This might make it easier for you to get in their good graces and receive a business loan.
Alternatively, you can go to an online lender or national lender for financing help. The benefit of using these types of lenders is that they possess more financial resources. For this reason, it's easier for them to provide loans to companies that don't have established profit histories.
Look at the Loan Provider's Financial Strength
When exploring all of your options for loan providers, look at your prospective lending institutions' financial histories.
This is important because you are partnering with your lender to expand your business. A poorly performing lending institution may charge you higher interest rates, fees, and fines to compensate for their poor performance.
To find out a lender's financial strength, look at their S&P Global Ratings. Financially healthy lending institutions are generally the safest lenders to work with long term.
Evaluate The Types of Loans They Offer
Another important factor to consider when choosing a loan provider is the kinds of loans they offer.
For instance, some lenders offer only SBA loans. Meanwhile, others offer SBA loans as well as commercial loans for various types of businesses. These may range from bars and restaurants to an office condominium or a multi-family complex.
Knowing which kinds of loans various lenders issue can help you to determine the right lenders to do business with.
Consider the Loan Provider's Borrowing Maximum
Figure out how much cash you're seeking to borrow before choosing a loan provider. That's because some loan providers establish maximums for the amounts of money they are willing to lend.
Some lenders may only lend out a few thousand dollars. Meanwhile, others may be willing to lend up to a million dollars.
Be upfront in your business loan application about how much you wish to borrow. This will make it easier for your lender to quickly make a financing decision for you.
Assess Their Loan Rates' Competitiveness
You may be tempted to partner with the very first lender who approves your application, but don't. This common mistake could end up costing you large sums of money long term. That's because another lender may charge you a lower business loan interest rate or even more personally favorable repayment terms.
Ideally, you should get business loan quotes from multiple lenders prior to deciding on a loan. If possible, try to apply to these lenders within a short period. This will minimize the impacts of the lenders' credit checks on your credit score.
Also, take a close look at your various prospective lenders' fees. These charges vary from one lender to another and can include underwriting and origination fees.
Business owners generally prefer lenders who will give them the biggest loans at the small interest rates possible. They also want lenders with lower fees and transparent schedules for those fees.
Look At Their Reviews
Reading online reviews is another way to determine which business lender is the best option for you.
Sites such as the BBB can tell you how past customers feel about various lenders. If you notice that certain lenders have repeat issues based on the comments, you'll likely experience the same issues if you work with those financial institutions.
You can also ask a prospective lender for references. These past clients can personally explain to you their experiences with the lender before you decide to partner with them.
Evaluate How You Feel About Your Interaction with Them
Although you might be tempted to choose a lender based solely on their loan terms and client testimonials, you should also consider how they and other lenders treated you throughout the loan application process.
During this process, you will be contacting and working with many representatives from various loan providers. Ask yourself which lender representative was most helpful and patient.
Avoid any lender that tried to rush you through the process, as this is poor customer service. And this means you may have a hard time getting payments processed in a timely and accurate manner.
The better the lender's customer service is, the less likely you are to experience headaches during the length of your loan term.
How We Can Help
As you choose a business loan provider, make sure that your chosen provider has a record of success in customer service and offers competitive loan rates. Your provider should also be financially strong.
Fortunately, at Penn Commercial Capital, we tick all the boxes. We are excited to help both small and mid-sized businesses that need working capital, loans, credit lines, and even lease financing.
Contact us to learn more about our loans, and fill out a business loan application today!