When it comes to small business lending, there really are two worlds out there. Depending on the size of your business and the strength of your cash flow, you may find that banks are hesitant to lend. Many banks find that loan structures that work for the business owner don’t work for the bank, and consequently they don’t make those kinds of loans very often. When you are looking for a loan, it pays to shop around and ask questions.
There are a number of ways that you can save money on the cost of your loan, while also structuring it to more profitably serve your business. There are many aspects of a small business loan to consider, including:
- Interest Rates. The most obvious comparison point, interest rates vary from institution to institution, and from loan type to loan type.
- Loan structures. Almost every financial institution has a customer type or industry that they focus on. Today, most of the larger banks focus on larger businesses and find small business loans harder to make profitable. But small business owners often need longer payment periods. For instance, Avadian offers 30-year loans, which most banks won’t. The longer structure places fewer burdens on cash flow, which can really help many small businesses.
- Origination fees. Most banks charge an origination fee, which adds to your closing costs and increases the overall cost of the loan. Another fee that penalizes small businesses is the early repayment fee. Be sure to ask, because you shouldn’t be punished for paying off your loan early.
- Tax implications. As you consider options for your small business loans, be sure to consider all of the tax implications. Equipment loans and vehicle loans, in particular, can have a big impact on your tax bill.
This guest post was written by our friends at the accounting firm of Barfield, Murphy, Shank & Smith (www.bmss.com). Their insights could possibly save you money the next time you apply for a business loan.