How to compare small business loans
When choosing the best business loan for your needs, you’ll want to consider factors such as:
📈 Interest rates
Determine whether a lender offers fixed or variable rates. Banks tend to offer more competitive rates compared with online lenders. If a lender charges interest as a factor rate or weekly fee, converting it into an annual percentage rate can help you better understand the total cost of the loan.
💰 Additional fees
Make sure you understand any additional fees a lender may charge, such as origination fees, closing costs or prepayment penalties, and ask questions if anything is unclear.
🗓️ Term length
Longer terms may mean smaller payments, whereas a shorter term could mean that you pay less in interest.
⏰ Repayment schedule
Small business loans may have daily, weekly or monthly repayments. Consider your budget and cash flow to determine the type of repayment you can afford.
⌛ Funding speed
If you need a business loan quickly, an online lender may be able to provide funds within a few days. Traditional lenders, on the other hand, can take anywhere from a few days to several weeks, but they often offer lower interest rates.
🤝 Lender reputation
Reading online reviews or speaking with fellow business owners can provide insight into what working with a particular lender might be like. While many online lenders are trustworthy, be cautious of those that promise “guaranteed approval” or make claims that sound too good to be true.
