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Things to Consider When Taking Out a Business Loan

Posted 27 Oct 15

Whether you run a successful business that you’re thinking of expanding or you have a great idea and want to form a new company, taking out a business loan offers a great and simple opportunity for growth and development.

Before applying for a business loan though, it’s important that you understand how it can influence you and your business in the future and that you consider both pros and cons of this choice. The most basic decision you will be making is finding the lender who suits your business’ requirements best.

A lot of company owners use banks to take out their business loans from, but today more and more often they seek a financial boost from private lenders.


Credit Score

Before you consider the commitment of taking out a business loan, it’s important that you know your credit score. Often, the traditional lenders will make their decision of rejecting or accepting your application based solely on your credit scores.

Request a personal credit report and check for errors, such as payments which might have been reported late and if you find any mistakes, do not hesitate to contact the credit bureau and the company involved to solve the issue.

Another part of your credit history which lenders will review is the relationship of available debt to utilised debt. If you are using the majority of the debt available, the lender will require a mitigating factor to increase your debt levels.


Income

When applying for a business loan, you will need to prove to the lender that you have the ability to pay it back. You must be able to provide an income statement which shows a record of your earnings for an agreed period of time. The amount of the documentation requested depends on the size of the loan you are considering.


Collateral

Unfortunately, no matter how successful your business is, you cannot predict the future. Therefore, a lender may request to see that you have assets to pledge as collateral in case of an unpredicted downturn or drop in your income.

Collateral can include assets, property and accounts receivable. A lot of company owners make a list of all the collateral that they and their partners can guarantee against the loan, when considering taking it out.

The last factor to consider is the amount and the purpose of the loan. At Tawanda Accountants we employ experienced and superior advisors who are able to find loans from leading financial institutions that best fulfils your business needs.

Unlike banks, we do not ask for business plans nor do we ask for forecasts or the completion of lengthy applications. We function as a mediator between you and an innovative loan provider who connects clients to financiers.

We offer our service at highly competitive rates which you can use to develop various areas of your business. There are no early repayment fees. As a business owner you will find lenders of fixed rates starting from 6.4% APR and monthly repayments spanning 1, 3 or 5 years.

If you would like to find out more about our offer, contact our experts at Tawanda Accountants and we will help you decide what option is best for your business.