Top Questions to Ask Your Business Lender

by | Dec 7, 2022 | Resources | 0 comments

Knowing where to start can be complicated for some companies looking to get a business loan. You probably also have numerous questions regarding the loan process. Business loans aren’t as hard to get as some people think. Getting approval comes from being prepared, having your documentation in order, and asking the right questions. Below, we list some key questions you may want to ask your lender and help answer them.

1. Can I qualify with less-than-ideal credit?

There is no correct “yes” or “no” answer here. Generally speaking, you will want to talk to the lender and find out about their qualification criteria. If they are stringent when it comes to credit scores, then you may want to look elsewhere. Often, alternative or online lenders will be more flexible regarding credit scores and other items.

They tend to weigh more elements; thus, a single number or score will not necessarily disqualify you from getting business loans. Also, keep in mind the type of loan you are applying for. For example, if you have a lower credit score, you might want to look into a merchant cash advance versus other types of financing.

In the meantime, start doing what you can to improve your current credit status. Try to pay down some debt. Make sure you remit all payments promptly. The more you can do before applying for a business loan, the better your chances are of getting approved.

2. Can a startup business get a loan?

While many lenders like to see a certain amount of time that a business has been in operation, there are various startup loans and business loan programs explicitly designed to help newer businesses. Keep in mind that if you are applying for business loans geared toward startups, the lender will focus more on your financial data and credit score. So you want to ensure that this documentation is where it needs to be.

Many business lenders don’t offer startup funding, but they typically only require 4-6 months of bank statements and a minimum monthly revenue amount to process your loan application.

3. What can I use a business loan for?

The great thing about working with online lenders is that you can use your business loan for anything related to your company. So, for instance, if you want to invest in a new office space or build out your current office space, your business loan can be applied to this project. You can also use business loans for marketing, hiring personnel, or launching new products.

Many companies use the proceeds from their loan to help boost cash flow during slower times. The flexibility is most definitely there when working with alternative and online lenders. Other lender types, however, may not be quite so flexible. So you want to look into any terms and stipulations before signing on the dotted line.

4. What determines business loan interest rates?

The question of interest rates is undoubtedly in the minds of many business owners. After all, you don’t want to be paying a fortune for the money you are borrowing. The answer here is “it depends.” Beyond the prevailing interest rate of the time, interest rates will be affected by several factors, including the type of loan, lender, and a company’s overall application. That is to say, your credit score, number of years in business, industry type, and the loan amount will determine your interest rate.

The Federal Reserve has continued to raise rates this year, so small business owners are urged to lock in today’s loan rates before any new hikes occur. For more info, click here.

5. How quickly do business loans get processed?

Again, this is an “it depends“ question. When working with a bank, loan processing can take weeks, if not months. And if it is an SBA loan, it can take even longer. The process goes much faster if you work with an alternative lender. Many companies will receive a decision the same day they apply. And the money will hit their account within just a couple of days. This is why many small businesses are turning to online and alternative lenders for business loans.

6. What documentation is required for a business loan?

As mentioned earlier, the more prepared you are and the more organized your documentation, the better the process will go for you. To this end, you want to ensure that you understand what the lender is asking of you regarding the required information and documents.

Among some of the more commonly requested documentation: tax returns, both business and personal, bank statements, financial statements to include balance sheets, cash flow statements, and profit and loss statements, any business leases, articles of incorporation; and it also helps to have a business plan to submit as well.

For details on business loan requirements, click here.

7. How is loan repayment determined?

This will be based on the type of loan for which you apply. Before the loan is funded, you will have all the information beforehand regarding repayment terms. So whether you pay weekly or monthly, the interest rate, and the actual payment amount, will be disclosed before you accept the loan and receive your funds.

8. Are automatic payments possible for business loans?

Yes, ACH (Automated Clearing House) payments from a business bank account are often acceptable for a business loan. That said, if you cannot do ACH payments for some reason, then your business will likely have other options to pay back the loan.

First Union Lending is Here for You

We want to help small businesses thrive and ultimately grow. This is why we do what we do. With short-term loans, merchant cash advances, and equipment financing, among other loan types, we have a solution to fit your specific business needs. There is no off-the-shelf approach with us. Our representatives walk you through the process every step of the way. Call 863-825-5626 today and let’s get started.