Navigating the world of business loans is often difficult because disclosures can vary widely from lender to lender. When pricing metrics approach things like APR and factoring differently, how can you be expected to make an informed decision? It’s like trying to choose the best car for your family, but each manufacturer lists their vehicle’s total price, features, and gas efficiency differently.
Given these challenges, it’s crucial for you do your homework and approach each loan option with fresh eyes. First, you’ll want to identify how much money you’ll need. According to the Small Business Administration, the median small business loan is about $140,000. And most don’t exceed $250,000.
So where do your needs fall? Knowing the loan amount up front will help you search strategically and save precious time. Once you’ve selected some solid options, review the basic elements of each loan product. These include the amount financed, funds disbursed, total repayment amount, expected term, and the frequency of payback.
As you make an initial evaluation, line up the comparable elements so you can spot the contenders for best loan. Part of this process is seeking out hidden fees, such as early repayment fees, late fees, or processing fees. Some lenders charge these on a one-time or regular basis, so it’s important to know exactly what you’d be getting into if you were to choose a certain loan.
Next, you should focus on the four most popular pricing metrics to truly understand how much your loan would cost. Here’s a breakdown: