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 all of your research to find a reputable lender
It might sound obvious, but it is vastly important to use a lender that is well-known and who has good reviews. Although the lender needs to be able to trust that you will pay his or her money back, it’s just as important that you can trust that he or she gives you honest, reasonable terms, and doesn’t have any secret loopholes that might get you into trouble.
DO get multiple quotes
It’s always a good idea to get a second (or third) opinion, and that goes for a business loan as well. Even if you think you might have found the small business loan for you, you should always get multiple quotes to compare to one another, and you might just find out that you almost missed a better rate. With any big purchase (even if it’s only lent money), doing a double or triple check, is never a waste of time.
DON’T take out more than you need
On the one hand, you should always take out as much money as you need in one loan, instead of taking bits of cash here and there (that will leave you with multiple interest rates and payment terms to keep track of). However, while you should take as much money out as you need, you shouldn’t take any more. This doesn’t include a small, calculated buffer amount that you might need for unaccounted expenses. But it is a bad idea to take out a big surplus of cash to use on unrelated expenses, which could land you in hot water when it comes time to pay them back.
DON’T use your loan for non-business related expenses
When you’re handed a large lump of cash at once, it might be tempting to use some of it to finish up your car payment or help buff up your vacation a little bit. Don’t do it! To keep yourself organized and out of monetary trouble, you should use your business loans for business expenses only. If you find that you need more money for your personal expenses, you should look into a different option for funding, that’s more geared for personal use.
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