There’s no shame in receiving some funded to give you a leg up in your business. In fact, most business owners have taken out, or will take out, at least one loan to help give themselves a boost and supply themselves with immediate working capital for their company’s needs. However, taking out a business loan is not as simple as it sounds. Here are some major DO’s and DONT’S when it comes to taking out a small business loan.
DO take out as much money as you actually need
It may seem financially safer to take out as small an amount as possible, even if you need a bit more, but in the end, it doesn’t pay off. You should absolutely take out the exact amount of money that your business needs. If you don’t take out enough to really make a difference in your business, the loan is essentially useless anyway.
DO have a clear understanding of the terms and conditions of your loan
Before agreeing to any type of funding, you need to be clear on what the terms of the loan are. What is the interest rate you will be paying, and is it accumulated monthly, annually? How much time do you have to actually pay the loan off in full? How often and what dates are payments due? These questions, and more, should all be answered sufficiently before taking out any sort of small business loan.
DON’T take out multiple loans at a time
It’s much more financially sound to take out one bigger loan, instead of multiple loans at once. Not only will this leave you with two different sets of terms to remember, but you will also have to pay two monthly payments of different amounts, most likely on different dates. This is a great way to become confused and get yourself into money trouble. It’s best to just take out the amount you need from one, trusted, loan provider.
DON’T put your assets up as collateral
There are some types of loans that don’t require the typical payment terms. While these may seem tempting, you should avoid putting up any of your personal or business-related assets up as collateral for your funding. This is a dangerous practice and could land you in some real hot water if anything goes wrong with your payments. Trust us, a late fee is a much better option than losing your home or your car.
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