If you think this economy is tough, try opening a business. Forbes research indicates that 543,000 new small businesses open in the U.S. every month, only 25% of which stay in business for at least 15 years. A little more than half are home based, and many are fighting to stay open. Business loans are major resources for America’s small businesses, though in 2011, 600,000 companies were denied loans.
A visit to the bank is often the first step for companies seeking loans, but because most small businesses are considered high risk, they are typically turned down. Alternative financing is the next step, making plenty of business loan types available. Still, there is no such thing as easy business loans. We’ll walk you through a few of the most important considerations is you’re getting ready to approach an alternative financing lender.
There Will Be Fees.
Like we said, there are no such thing as easy business loans, and that is no clearer anywhere than in the additional fees in the application process. When you submit a business loan application form, you are often agreeing that if you are granted a loan, you will pay:
- Platform fees.
- Loan guaranty fees.
- Loan servicing fees.
- Returned payment fees.
- Broker fees.
- Closing costs.
- Late fees.
Know Your Risks.
If you can no longer hold up your end of the bargain and you default, there can be some hefty repercussions. These are some of the most common consequences:
Secured Loans– Because you pledged collateral in order to accept funding, the funding company can seize that collateral if you default.
Personal Guarantee– If you can no longer fulfill your obligations, the entity that personally guaranteed your loan can come after personal assets like your house, car, or college fund.
Unsecured Funds– There aren’t many consequences in this case. If you default, you’ll be written off with no threat to your personal assets.
Gather Your Documents.
Again, easy business loans don’t exist. Along with your business loan application form, you’ll need to provide documentation including:
- Six months of bank statements.
- Six months of processing statements.
- Last year’s business tax return.
- Your driver’s license.
- A voided check for the business account.
Though there isn’t any such thing as an easy business loan, there are ways to simplify the process. Find a lender that seems genuinely interested in helping you succeed and that will answer all your questions. Business loans will never be easy, but they shouldn’t be impossible.