Nowadays most of the traditional lenders and NBFCs are providing a business loan at an attractive rate of interest. Small business loans often come with a lot of additional fees and hidden charges which you may not know about until you research about it thoroughly. Small business loans are needed to refinance your newly started business, any new venture or investing in renovations, upgrades, expansions of your startup business.
While applying for small business loans to grow your business, a loan must be taken at the right time to avail the most benefit out of it. As these loans work as a guard against any unforeseen events in the near future. When taking a small business loan, you should keep an eye on some of the important factors apart from business loan interest rates. All these factors combined together can be called as the cost of a business loan.
Let us take a look at some of the fees that we may encounter while availing a small business loan.
Most of the lenders and brokers charge this fee when you apply for a business loan. This fee is charged to process the paperwork and getting the loan approval on track. Generally, lenders will calculate this origination fee as a percentage of total loan amount you have applied for. These are usually expressed as a percentage of the principal you are borrowing.
Check Processing Fee
You should check out your processing fee apart from the rate of interest. Checking this is mandatory for all business loan applicants. However, some lenders also offer a zero processing fee to attract customers as a part of the festive offer. It is wiser to make use of such factors as they will help to save your cost pertaining to the total loan amount. Most banks usually charge a minimum processing fees that usually vary between 2% to 3% percent from bank to bank.
Any Hidden Fees
Most of the lenders also charge some application or admission fees when you apply for a small business loan. It is crucial to consider these hidden charges while calculating the total cost of a small business loan. To make very clear, some banks also share this information directly with their customers. However, it is the prime responsibility of the loan seeker to check this information with the lender they are applying for the loan.
Also, check if your small business loan requires any collateral to kept as a security with the lender to avail a business loan. However, there are a number of lenders already present in the market who offer this loan even without any collateral but the rate of interest charged in such cases will be high. Thus, you are advised to compare the benefits with the cost and accordingly make any decision before planning to apply for a business loan.
Some banks also offer a lot of additional features and flexibility to repay back the loan to those who apply for a business loan. Many times, maybe your business is facing a hard time, in that case, some lenders will give an option to temporarily suspend the principal repayments thus giving leniency of just paying the interest rates. Apart from this facility, most of the borrowers also get another facility to repay their ongoing loan ahead of the loan tenure that means pre-closing the loan without any penalty or fee charges.
When applying for a business loan, you must keep certain important things in your mind like its rate of interest, processing fee, prepayment charges and any other hidden charges that may be a huge cost for you to afford. So, it is wiser to check these factors beforehand while applying for a small business loan.