Entrepreneur always require finance either for starting the business project, or to strengthen and expand business. The vast majority of the time, you will need to go to a financial institution to apply for a business loan.
In the market there are always so many possibilities as convenient will you avoid making a hasty choice and meditate your financing decision. The comparison should be your method. At the time of evaluate and compare the different banks or financial institutions that can provide the required credit, it is essential that you review a wide range of factors to choose the most appropriate financial offer for your business:
Analyzes the use: It is important to define what is to be used (working capital, remodeling, real estate acquisition, growth) because it depends on the type of loan you should look.
Check if you are eligible for credit: Some banks evaluate only the cash flows of other companies and assess their ability to pay, based on their financial statements. If your financial structure is not very well, the options are reduced.
Identifies the area of the bank to which refer: Within the banks there are different types of banks that offer services to the companies according to their levels of sales.
The total cost: Analyze the characteristics of credit. The total cost of financing, known as cost effective, is the most important criterion that must be observed when comparing the different alternatives. This element refers to the true rate that you must pay on the loan, and is made up of the interest rate plus additional costs that are typically included in the loan, such as the cost of granting or maintenance.
The term: It is the period of time that gives you the financial institution to repay the loan and pay interest. To choose according to your capacity to pay, it will serve to understand the following: a shorter term is usually lower interest rate but higher fees to pay, while if the time is greater, the interest rate will also be, but lower fees to pay.
The exchange rate: It can be a fixed rate, variable interest rate or combined rate. Fixed rates remain constant during the life of the loan, variable rates are adjusted according to certain parameters, and the combined rates usually start being fixed rates to then become variable rates. Fixed rates allow us to know in advance which will be assessed and, therefore, give control and the security of knowing how much is that we are going to pay. While the variable rates have uncertainty that may increase at any time, but usually are lower than fixed rates.
Early cancellation: Also consider whether credit gives you the ability to make additional payments in order to reduce debt, or cancel it in advance in the given term.
Financial institution: Evaluate your customer service and your willingness to provide all the information you require, their ability to address any concerns you have, its speed to evaluate the application and to grant you the loan, among other things.
Credit History: It is advisable to purchase the products from financial institutions of which we are already customers, in order to form a good credit history and thus we can later access credit with better facilities and benefits.
Following these tips, you’ll have a better idea of which credit for your business you will have to choose.