How To Get the Best Rate on a Loan

When you want to secure a loan for your small business, it can be hard to know exactly where to go and who to talk to to get the finances you need.  
 
Borrowing money is a risky proposition, and it can be difficult to make sure you are getting the right loan with the best terms for your situation. Not all small business loans are created equal.  If you start to shop around before you know exactly what you’re looking for, you could make the mistake of paying too much for the wrong loan with the wrong rates. 
 
Here’s what you need to know the next time you’re looking for lenders: 

Choose the Right Type of Loan for the Job 

You may think that getting a loan is nothing more than asking for money and agreeing to pay it back for a certain amount each month. However, there is much more to it than this. Depending on what your needs are, the type of loan you need may vary, and each type of SBA loan carries different obligations with it. 

SBA Real Estate Loan 

An SBA Real Estate Loan can provide you with up to 90 percent of the money you need to buy or expand your space, with a low down payment and a sensible repayment plan. Usually, you have to meet certain requirements, including having a sufficient amount of equity and have already exhausted your existing resources. However, if you meet these conditions, a sensible, easy-to-manage loan is just an application away. Yes, it’s a detailed application with a thorough review process, but for those who qualify, this can be an excellent option. 

SBA Equipment Loan 

An SBA 504 loan is ideal if you need to purchase equipment. This type of loan is perfect for the owner who is looking to obtain funding for the various machines and pieces of equipment that are necessary for the day-to-day operations of the business. Even if you have been denied funding from other sources, an SBA 504 loan is still obtainable, with a low APR and manageable payment options. 

Interest-Only Hard Money Loans 

If you need capital to keep you afloat now, but you are anticipating a large payoff within one to three years, then a bridge loan, otherwise known as a hard money loan, might be a way to access funds and move on your deal while maintaining liquidity in the short term. These loans usually only require you to make payments on the interest during the life of the loan, with a large balloon payment at the end.  

Construction Loans 

Many lenders are uncomfortable with providing long-term loans during the risky building construction phase of a project when so much can go wrong. Construction loans are short-term loans that fill this gap until the project is complete and are a less risky funding opportunity for lenders. Construction loans are great because you are not required to borrow the full amount of the loan right away. Instead, these loans often allow you to take the money you need when you need it at specified completion milestones along the life of the project. So, you will only end up paying on the money that you have actually borrowed, which can help keep your terms and payments down. 

Keep Your Credit Risk Low 

One of the fundamental truths of credit is that the lower the loan risk, the lower your payments will be. Lenders do not always like to lend money to high-risk clients, and this wariness manifests itself in the form of higher rates and payments. Avoid these problems by keeping your risk profile low by building a strong, reliable history of repaying loans on time and keeping a positive cash flow in your books, which will show the lender that you will always have the finances you need to make your payments. 

It is a widely known and accepted rule of business that interest rates change. As the economy changes, the rates you might be offered will change to reflect that. The good news is that right now, due to the economic uncertainty we find ourselves in, we are seeing some of the lowest rates ever. As a business owner, it is up to you to take advantage of the opportunities the low-interest rates bring you. Getting and securing a loan now, with these historically low rates, means that you could end up saving yourself thousands of dollars, over the life of your loans. 
 
If you need funding to take your business to the next level, let AFP help. We are ready to listen to you, assess your situation and match you with the right lending company that can give you the financial opportunity you need to succeed. Contact us today! 

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