When shopping for a business loan, many entrepreneurs make the mistake of focusing solely on the interest rate at the expense of other factors. While the interest rate is important when choosing a business loan, it’s not the whole story. You should be wary of surrendering too much control and flexibility for the sake of a few percentage points on an interest rate. Otherwise, any kind of setback may leave your business, and whatever assets you had to offer as collateral to secure that lower rate, at risk.
Shop around to understand what’s available
Different banks offer different loan products. Key differences are often buried in the fine print. Look for the following information:
What types of loans do different banks offer?
What are the loan authorization policies and procedures? Who will authorize your loan?
Are there specialized account managers for your type of loan or business? These individuals can sometimes better appreciate and understand your business.
Is your account manager willing to negotiate with you? For example, could you get lower fees and more flexibility on repayment terms? Don’t just take a bank’s word for it. Tap into your network of business contacts. Ask them about their experience with a given bank, the quality of service, any problems they may have had, what was and wasn’t negotiable, and what the bank looked for in a loan proposal.