There’s a lot of new information to consider when it comes to choosing the best business loans for small businesses. Read the Mortgage Masters guide to see questions you should ask a potential loan broker.
The Future of Variable and Fixed Rates?
Usually when comparing loan options, the main point of difference is their interest rate. Don’t, however, immediately jump for the one with the lower interest rate – it pays to do the maths for the long term!
Often, commercial business loans with a lower interest rate are only fixed at that rate for a number of years. Then they move to a variable interest rate, which may turn out to be higher. On the other hand, a loan that has a higher interest rate to start with may be fixed at that rate for much longer. Look at the long-term calculations before you make up your mind on commercial business loans with fixed interest rates.
Additional Features Included in the Loan?
Business loans for small businesses can offer a surprising array of benefits, and these may end up adding up for you financially. The best small business loan lenders may be able to offer you the option of business overdraft on your account, or an extra line of credit that comes with the loan.
Keep in mind that there is no free lunch, so these additional features are usually paid for in the sense that they come bundled with a loan with higher interest rates. Again, do the cost analysis to work out what makes the best financial sense for your business.
Secured or Unsecured Loan?
When you apply for a business loan, you can choose between secured and unsecured loans.
Most small business lenders will primarily offer a secured business loan. This means an asset, such as commercial assets or premises, is used as a security if your business loan falls through. While the downside is that you are risking losing your designated assets, having something of tangible value to back up the loan gives lenders more confidence to invest in your business. This confidence will translate into lower interest rates and other benefits.
The alternative is an unsecured business loan. While this doesn’t put up any asset to the risk of being lost, it also makes your loan seem riskier to potential lenders. Unsecured loans often come with higher interest rates, as well as a lower cap on the maximum amount of the loan. Unsecured loans may be the right choice for businesses that don’t want to risk the loss of any valuable assets, or businesses that are already showing signs of strong growth, so they may be able to impress investors even without a secured loan.
Choosing between a secured and unsecured business loan is a critical choice, and important to get right. Visit our Commercial Loans page to learn more.
Talk to a Loan Broker
To book a consultation or ask any questions you may have about your finances, give us a call on 0800 630 7171.