As an entrepreneur, coming across lenders who do not vest their trust in your plans is quite normal. In your pursuit to take everything a step ahead, you often try to push your limits. You tend to push for better things, expensive things. However, most of these things are beyond one’s budget. For this reason, most of the entrepreneurs opt for a Business Finance. A loan that can help them financially and can aid their cause of achieving better things personally and professionally.
When availing a business loan, most of the entrepreneurs often neglect the basic criterion. There are certain things that you must keep in mind when availing a business loan which will help you financially. Entrepreneurs often end up paying too much on a business loan, and that is because they tend to overlook some obvious things.
Here are a few things you should keep in mind in order to Avoid Paying too much on a Business Loan:
APR: When you are looking to take a business loan, you should always assess the APR. An APR (Annual Percentage Rate) is the amount of interest which you pay on your total loan amount annually. APR is directly related to the EMIs. A higher APR will translate into higher monthly payments and vice-versa. Apart from the APR, you need to keep other payments in mind as well. These include an application fee, annual costs, origination fees, service charges and so on. Compare these elements using online tools and get the best product for yourself. If you like a product, question the lender about the APR, if they cannot tell you about the projection, simply walk away and look for other options.
Prepayment penalties: Most of the credit products come with a fixed repayment amount. Due to this, it becomes impossible for an entrepreneur to save money out of it. In order to avoid doing so, it is essential that you inquire for details and gain fair knowledge about the prepayment charges from your lender.
Double Dip: Most of the entrepreneurs are open to taking an additional loan over an existing one. The thing you must note here is that in such a scenario, some of the lenders unfairly double charge you. Make sure you do not fall victim to this practice. Once again having a transparent and clear conversation with the lender will prevent you from paying higher interest unnecessarily.
Stacking: Do not fall for it. Stacking is nothing but falling for lender’s proposal to add a loan on an existing one. In such a scenario, you might often end up with multiple cash advances, wherein the percentage of sales from your business would divert tremendously. It can seriously hurt your business. Yes, there are situations where you are in a financial crunch, or you need a capital injection to leap further. In a situation like this, you do not always need to take a new loan or a new credit product. Refinancing your existing debt can get the job done and might as well lower your overall costs.
Pressure: Do not fall prey to peer pressure. When you are shopping for a loan, assess everything before concluding. Just because somebody is inculcating some financial measures in his/her business, you do not need to do the same. Understand the needs of your business and evaluate whether a suitable product is available in the market for the same or not.
Talking about suitable products – Business Loans, NBFCs in recent times have become a go-to-option. NBFCs such as Bajaj Finserv provide less interest rate on Business Loan. Make sure to check out their loans when you are looking for business finance.