Applying for a business loan can be complicated due to the vast amount of options available, which is why many financial experts will suggest you come prepared.
Although that may mean conducting thorough research on the different types of lending options available, it’s best to leave that up to the experts. What’s more important is to know what questions to ask your lender.
What to Ask Yourself
Before consulting a lender about Australian business loans, you need to decide what lending option you’ll require based on your need. To do this, ask yourself the following questions:
What is my Credit Score?
Your credit score will impact the types of loans you can apply for and their interest rates. If you have a credit score below 680, you’ll have a difficult time applying for more loans, while a score below 650 will only give you access to student loans or a bad credit loan from a private lender.
How much money do I need?
A lot of money won’t solve your problems. In actuality, the more money attached to your loan, the more interest you’ll need to pay.
Going in unprepared for this question will get you kicked out the door quickly, but if you know what you need for your project, the bank will consider you.
How quickly do I need the funds?
Some business loans will take weeks, sometimes months before they’re approved, so if you don’t have the time to wait around for funds, you need to make that clear.
Unfortunately, that won’t mean the approval process will be faster; it will just help you level your expectations.
What to Ask Your Lender
Now that you have an idea of what you need and when you need it, you’ll need to discuss with your lender what options are available to you. Be sure to ask them the following questions:
Do you lend to businesses in my industry?
While most banks or lenders will offer money to just about everyone, it’s better to find someone who is able to help you specifically.
You can save yourself a lot of time and money that you likely don’t have by asking this question upfront. Remember that your business needs come first.
What are the total costs of the loan, including interest?
When considering the total cost of the loan, you can’t just look at your monthly payments as they aren’t an accurate indication of what you’ll pay over time.
Be sure to ask about the fees incurred by the interest rate and its percentage, so you can more accurately price other loans.
When is my first payment, and what is my payment schedule?
It’s never good to make assumptions of when you’re expected to pay. Although most loans have a payment schedule of daily, weekly, or monthly periods, your first payment may not come out on the same date every time. Most banks will change your start date if it doesn’t work for you.
Can I make periodic payments, and how do I make them?
Some loans will charge your prepayment penalties or will still charge you interest if you pay the entire loan off quickly. Try to find a loan that provides some flexibility.
If you’re allowed to make periodic payments, ask if you can do so by check, credit card, e-payments, or other such ways.
Can I speak to your previous customers?
Along with researching their Better Business Bureau score, you may want to ask about their current and past customers. Most of their reviews should be positive, and they should be capable of fixing typical customer problems.
If they don’t allow you to speak to their current customers, that’s not an automatic sign of distrust. It could mean they’re protecting their privacy.