With all this talk about rising interest rates, you’d think it was the only thing that matters. But what are the red flags you should be checking when you’re looking for the right business loan.
Have you ever heard the phrase ‘the devil is in the details’? It’s an old idiom meaning, while things may seem simple at first glance, sometimes its only on closer inspection you find hidden, unexpected elements.
This is especially true when it comes to securing finance for business loans. While an enticingly low interest rate may be front and centre, if you dig a little deeper, you may find clauses, fees or other conditions that are far less appealing.
That’s not to say interest rates don’t matter, because they absolutely do. But there are a few things that should be at the top of your ‘watch out for’ list. Some red flags you should be aware of when looking for a new business loan.
If the interest rate on offer seems too good to be true, then it probably is. Is it a low ‘from rate’, designed to lure you in? Then, once you get the paperwork back BOOM. There’s an entirely (and much higher) interest rate on your loan documents?
Also watch for interest rates advertised with an asterisk *
When you apply for any loan, certain documents need to be prepared. The documentation fee covers the sourcing and preparation of these loan documents, which may include, but isn’t limited to, identification documents, bank statements, credit reports and details of the property you’ll be offering as security. This can be quite a substantial fee so it’s always a good idea to ask upfront what this fee is likely to look like.
If for any reason the loan doesn’t proceed, will you be refunded your documentation fee?
Sometimes known as an application or set-up fee, this fee is charged at the start of the loan to simply establish the loan. Similar to the documentation fee, it may be considerable so keep an eye out for it.
However, not all lenders charge an establishment fee. This means you may be able to negotiate your way down or out of this fee, or find a lender who doesn’t charge it at all.
The valuation fee is charged to cover the costs of a professional, third-party valuation of the property being offered as security for your business loan. Costs of this fee vary greatly depending on where the property is located.
The Letter of Offer is your formal loan document. It contains all the information about your loan including:
You should carefully check all these details and advise the lender if anything is incorrect. Unless otherwise instructed, don’t change things yourself. Leave that to the lender.
Also known as discharge fees. This fee is charged if you repay the loan sooner than expected because the lender misses out on the extra interest you’d otherwise have paid. The take away from this is to not be dazzled by a shiny low interest rate (especially with all this talk of rising rates) and to carefully check your paperwork.If you want no fuss, straightforward business loan solutions, contact the Strive Financial team today.
*(always follow the asterisk and read the small print)