All business leaders know that growth requires capital. And when you’re looking to take your company to the next level, it can be daunting to decide what you really need to make that step.
Last week, we talked about being aware of scams related to lending to businesses. If you did not get a chance to read it, check it out here.
In addition to protecting you from scams, the Saddock Advisory team can help you determine how much you need in the loan and guide you in securing and reassuring existing sources of capital while steering you clear of any red flags.
Securing business financing is an exciting time.
And yet unfortunately many business leaders let their excitement get the best of them and they fail to do their due diligence, which is why we’re here!
We want to help you understand just exactly what is in the documents you’re signing and stop you from signing anything that may be potentially harmful to you and your business down the road.
If you want to get a better idea of business loan agreements and safeguard your company from disastrous financial moves, read on!
The Ins and Outs of Business Loan Agreements
Even if you have a stellar financial advisor on your team, it helps to have an idea of what you’re signing your business to.
So, let’s start with the basics. A business loan can appear to be complex, but this is because it is designed in such a way to protect both parties.
It’s always important to double (and triple) check the following:
- Loan amount
- APR on the loan agreement
- Payment terms
- Total loan cost
You probably already knew to hone in on these four aspects, but they’re big ones and worth noting. Now let’s move on to the fine print. We like to take our time looking at this for our clients.
1. Penalty Fees
How does your lender define “penalties”?
This is the most important step to examine. Penalties can vary among lenders and loan agreements. Understanding the penalties before signing can help safeguard your business from any missteps.
2. Type of Interest
You need to know if it’s fixed interest or variable interest. Keep in mind that your interest rate does not provide you with the full cost of your loan, as you must also consider the APR for a clear idea.
3. Payment Schedule
Is this what you agreed to?
Can you stay in line with this schedule?
Understanding the payment schedule will keep your business in good standing and save money on any late fees or penalties.
4. Prepayment Penalty
Not every loan comes with this, which is why it’s important to know before signing. If your loan comes with this penalty, then you face paying extra fees if you finish paying off your loan ahead of schedule.
While every loan agreement will have different features and you can certainly add your own features, we hit on all the basics in this post.
If you want to get a better understanding of your business loan agreement or would like an expert opinion, we can help! Let our team of experts break down the basics of your loan and ensure your business is protected.
You can schedule a consultation or get in touch with us here.