Are you looking for better loan rates and conditions to fund your business? You can get funding for your business with better loan terms and flexibility through alternative lenders.
Alternative lenders generally can offer businesses with extra flexibility as they are privately-owned establishments. These lenders are not limited to the terms and conditions of regular banking institutions. These lenders source their funds from numerous investors that can offer better options making them more preferable for many Australian businesses.
How to Find the Right Business Loan for Your Business
Thus, if you are looking for better loan options, look beyond traditional financing institutions such as banks. Know all the options available for your business in terms of rates, fees, conditions, and customer service.
3 Major Things to Know Before Getting a Business Loan from Alternative Lenders
- In recent years, the growth of alternative lenders has grown in number. This gives borrowers more choices than ever before.
- Alternative lenders can provide unsecured loans of up to $500,000. Their terms vary but are generally between running between three months to five years. You may need to contact a loan specialist to connect to non-conforming lenders.
- You will have to meet their minimum requirements in order to qualify for a loan. Your business should be in operation for a set number of years and that it must meet its monthly income requirement.
5 Kinds of Business Loans Alternative Lenders Provide
- Bad credit loan. People with bad credit track record can be eligible for this loan, however, the percentage of interest could be higher.
- A line of credit. This type of loan is a revolving loan that works like a credit card or overdraft. This enables you to take funds up to a certain limit. When payment has been made to the loan, you gain back access to your funds.
- Short-term loan. A lump-sum loan having a fixed repayment plan that ranges from 3-12 months. It is easier to secure such loans because the risks are lower since the repayment term is shorter.
- Secured loan. This loan calls for you to provide assets as collateral or guarantee for the loan. Assets could be your home or business equity. This loan is could be made available using a line of credit or a term loan.
- Unsecured loan. This loan doesn’t demand assets to guarantee the loan. It may be a term loan having a fixed repayment plan or a line of credit.
6 Things to Consider When Comparing Business Loans
Not one loan is the best business loan. It all really depends on the circumstances surrounding your situation. But you should always keep the following in mind when comparing business loans.
- Can your business afford to get a loan? The most important factor in taking out a loan is to consider if your business can afford it. Consider the costs upon taking out a loan including the monthly repayments you will have to pay. Match it with your business’s monthly revenue and the already existing expenses that your business will have to pay.
- What is the working interest rate on the loan? In order for you to understand better interest rates, you will have to know variable and fixed interest rates. These types of interest rates can have a great effect on your business if you choose one over the other. A fixed rate is not affected by fluctuating interest rates while variable rates change as the market rate changes.
- How can I make repayments for the loan? Lump-sum loans have fixed terms which include the loan amount and the interest spread over the life of the loan. Take into account that lenders are often way more versatile with monthly payments for business loans compared to personal loans. Verify your lender’s repayment conditions prior to applying for a loan. Note that lines of credit don’t follow a fixed repayment condition.
- What is a comparison rate? The comparison rate puts together interest rates, fees, and other possible charges into a single percentage. This makes it easier for the borrower to compare options.
- What fees are possibly added on top of the loan? Fees are application fees, processing fees, termination fees, and exit fees. Other fees include monthly ongoing fees such as advance fees and service fees.
- Secured or unsecured? Decide on a secured or an unsecured loan. Both choices have their pros and cons but the right choice will depend on your business’s needs and situation. An unsecured loan will mean higher interest rates while secured loan will mean higher loan amounts equivalent to your assets but remember that your assets are at stake in case you make a default.
Talk to a professional mortgage broker to help you assess your needs. The right business loan really depends on your business standing. The bottom line is that you choose a business loan that you can afford and that it meets your business needs.