Starting your own business is one of the most rewarding yet daunting experiences you will ever have. Perhaps the most complicated to navigate is the business loan process. Not only will you have to know what you need to present to your chosen lender, but you’re also expected to know some of the jargon being used. So, to make that experience a little easier on you, we’ve outlined a few basic terms that you must know to obtain a business loan.
One of the first things that will come up during a business loan interview is your assets. When a lender asks you to tell them about the type of assets you have and which you are willing to put up for collateral, they are talking about personal property. Now, there are two types of assets, depending on your position. If you’re just starting a company for the first time, they are usually asking about personal property such as cars, extra homes, and boats, to name a few. If you already own a business, they may want to know about company cars or equipment that can be possessed if you cannot pay back the loan.
APR (Annual Percentage Rate)
When obtaining a business loan, the goal is to get as much as you can with the smallest APR as possible. The APR stands for annual percentage rate. This is a sort of fee that you’re going to be paying for having the loan, expect you’re going to be paying for it every year that the loan is active. Even if this is your first time asking for a business loan, it is highly recommended to negotiate on the rate if possible.
It can be stressful to have a ton of loans added with multiple due dates and payment amounts. When you are offered a consolidation, you are essentially putting all those payments into one. This allows you to concentrate on one due date, thus eliminating the risk of forgetting to pay a loan on time.
As a new business owner, you’re going to have a lot on your plate with not much very help. This can cause you to forget to pay your business loan on time. However, banks understand this and thus provide business owners with what is called a grace period. A grace period is a set amount of time after the due date, where a missed payment doesn’t mean you are having to pay a late payment fee or have interests accumulate.