Getting your business funded can be tough if you aren’t bringing in millions each month. Lucky for small business owners, times are changing though. It’s getting easier.
If you are thinking about using an alternative lender to get some funds for your business, there are a lot of considerations you’ll need to make as well as questions you need to ask. Questions not only for your potential lenders but also for yourself.
Here are some tips and things you’ll need to help navigate the process of finding an alternative lender for your small business.
What Type of Lender is Best for me?
The first thing that needs to be considered when you are seeking an alternative lender is which type will be the best fit for your business. There are really three different types:
First is the type much like Sprout, a marketplace lender, which offer a variety of different lending options that customers can potentially choose from. Then there is direct lenders like OnDeck and Can Capital, who offer working capital loans. Your third option would be specialized lenders like Kabbage, who work with online retailers.
Will This Lender Work with My Business?
You have to start by ruling out the lenders that don’t fit with your industry or business models. Some specialized lenders only work with specific types of businesses so you’ll have to find out which to work with. Once you’ve done that, you can take a closer look at any requirements listed on the lender’s website to see if you fit into their category.
What Different Options Are Offered?
For lenders like Sprout, it can help to learn about all the different options that might be available to you before applying, so that you know what might be the best option for you.
What Type of Loan Is It?
You should also find out the exact type of loan you are going after, and the terms of it, so that you can be sure you will not only qualify for it but also be able to pay it back in the time allotted.
What is the Length of the Loan?
The length of the loan is going to be another important consideration when looking for what is right for you. It’s got to be that perfect length so that it’s enough time so that you won’t be strapped for cash in order to pay it back on time, while also not being too long as to keep your business in debt for the foreseeable future.
What is Your Rate?
The interest rate you receive will also play a huge part in how you configure your payments and the plan surrounding your loan. Of course you’ll want the lowest rate possible, while still keeping a reasonable payment schedule. So look into comparable rates before signing on with any one lender.
How Do You Accept Payment?
On rare occasions, some loans will take out large lump sums. Others will take out smaller amounts daily or weekly. You’ve got to make sure that your lender offers the type of payment plan that works with your specific preferences.
Will This Payment Plan Work for My Business?
When you have gone through all the different factors you need to consider, you should be able to come up with a more general idea for how long and how much it will take for you to pay back the loan. At that point, you just need to decide if that’s the plan that will work best for you.
Are There Any Payment Penalties?
Most loans will always have some sort of penalties for late payments. Some may even come with penalties for early ones. You’ve got to make sure you know all the rules before signing on with a lender.
Can I Pay Off the Loan Anytime?
If your business exceeds performance expectations and you end up having some extra cash, it may be beneficial to pay off your loan early. Just make sure first that your lender allows early payments and wont charge you a penalty for paying it off early.
Will This Loan Impact My Credit?
Different types of loans may have different levels of impact on your business’s credit score. Speak to your lender directly or do some research on the types you are considering before you apply.
What Happens if I Can’t Pay It Back?
In the event that you are unable to pay back your loan, you will need to know what the penalty is and what the lender may be able to go after.
What Happens if I Need More Time?
You could end up simply needing more time to make the payments that are due on your loan. You may have to go over the original time allotted. Ask your lender if they offer any refinancing or restructuring of plans to accommodate businesses that need a bit of extra time.
How Can I Apply?
Most alternative lenders offer a simple application right there on their website. You can ask them if there is anything else involved or anything else you could do to ensure the process goes along smoothly.
How Will the Application Impact My Credit?
If you complete a lot of applications, it can start to negatively impact your credit. You should try and apply to only the ones that are most appealing and viable to you. Which means, do your research!
What Type of Service if Offered?
You should also be sure that there is some sort of customer service program set in place so that you can get your questions answered or help with any issues you may have. Ask about all of this before you sign up.
Where Can I Learn More About These Lenders?
Even when a lender seems great on paper, other people and businesses that have dealt with them may have different things to say about them. It is recommended that you look up on lenders sites like TrustPilot so you can see other peer reviews about pricing and service.
Working With Sprout
Sprout is an online marketplace where businesses come to compare and save on small business loans. You go to www.SproutLending.com and simply fill out a profile or call us at 800-865-6057. Based on that information you provided, Sprout suggests the best matches depending on the amount and purpose of the business loan you are seeking. Last year, Sprout and it’s staff was responsible for over $100 million in loan approvals.