Business Loan Agreement’s Fine Print: The 4 Hidden Details
Part of starting up your own business requires securing the required startup capital and that means applying for loans. Applying for and securing a business loan can be a lengthly process. Every loan’s approval time varies based on several factors that may be outside of your control; however, you can speed up the process by making sure all the necessary information you submit is neat, organized and easy to read. I strongly recommend filling out any forms on the computer and then printing those forms, rather than filling them out by hand. You’re most likely to seek loans through your local financial institutions as well as the SBA. In either case, every loan agreement comes with the fine print, and here’s why you should read it
Once you get approved you’ll most likely be very eager to sign the business loan agreement and actually move forward with your business startup, but wait. It’s important you take the time to read the fine print. Here are the 4 hidden details stated in the fine print of your loan agreement:
- Wether your loan’s interest rate is fixed or variable and when it will change.
- Your payment schedules, grace periods and late payment fees.
- Early pay off penalties if you pay the loan off ahead of schedule.
- Lender’s definition of “default” on payments and the penalties incurred.
These details seem pretty obvious and too important to miss, but you’d be surprised how many people overlook them in the excitement of getting approved and signing the agreement. Not knowing these details will cost you extra money.
A great way to go over your agreement’s terms is to either make a copy and mark it up as you read, or write down your questions on a separate sheet. You can address your questions directly with your lender, or talk to a counselor at your local SBA or SCORE office.
Key take away: Make sure you understand what you’re signing BEFORE you sign it. If something doesn’t seem right, double check and always use credible lenders – you can check feedback and verify reviews online and at the better business bureau.