Ask the right questions

Before you walk into a bank or apply online, it’s important that you’re prepared to have the important conversations that will help you secure financing for your small business. Here are a few questions you might want to consider ahead of your big chat.

 

About the Lender:

  1. Have you ever approved a loan for my type of business?

  2. What is your average loan amount for a business of my size?

  3. Who approves or denies the loan application?

  4. How long does the application process take?

  5. Do you require a personal guarantee?

  6. How quickly can you provide the approved funds?

  7. How much can I borrow based on the asset I’m using for collateral?

  8. What deadlines will be imposed on me to accept my loan offer?

  9. Will you report my loan repayment information to major credit bureaus so I can build my business credit?

    1. Will you report positive as well as negative information?

  10. If I am unable to repay, how will you try and collect on the loan?

 

About the Loan:

  1. What is the annualized percentage rate or APR?

  2. What additional fees will I need to pay?

    1. Are they included in the interest rate quoted?

    2. What are their payment amounts and frequency?

  3. What is the full cost of the loan over its lifetime?

  4. When does the loan need to be paid in full?

  5. Does the loan have a prepayment penalty?

    1. If so, what is the prepayment cost?

  6. If I take a second loan with you in the future, will I need to pay any financing charges on the existing principal of my previous loan?

 

If Working with a Broker:

  1. What is the annualized percentage rate or APR of each option you are presenting?

  2. What will you, the broker, be paid for each option?

    1. Do you make more money if I take certain loans?

  3. Do you get paid by me or by the lender?

  4. Can I see an overall summary of what types of loans borrowers who work with you end up with?

    1. What’s the average interest rate?

    2. How many take a bank loan, medium-term online loan, or merchant cash advance or short-term loan?

For more information about the Borrowers’ Bill of Rights, including additional questions to consider, visit http://www.responsiblebusinesslending.org