Even the highly experienced entrepreneurs sometimes find it tricky to make the best possible business funding decision. With a plethora of options constantly staring business owners in the face, it has become imperative for business owners to have in-depth understanding of the available small business financing options before signing the dotted lines.
Some of the important questions that should be asked when looking for working capital funding are highlighted as follows:
Are they going to pull credit score?
Every business owner should know whether the lender or the product requires pulling out their credit before agreeing to a funding option. Financial products like invoice factoring, term loans, and lines of credit fall under this category of financing options that rely on the personal credit of the business owner to approve a loan application. Consequently, borrowers should be sure they understand what they are getting into before putting pen to paper.
Are they going to contact customers?
Funding options such as invoice factoring often require contacting the customers. While some businesses are indifferent about third-party interference, others are uncomfortable with such an arrangement due to the notion it might pass to their customers.
Are they giving more money than needed?
Having more money than needed at a particular time can be sometimes detrimental to the business as this can add up to a lot of unnecessary interest payments. Therefore, business owners should be sure of the amount they are getting from their lending institution.
Do they charge a lot in fees?
It is extremely important to keep an eye out for things like origination fees, subscription fees, maintenance fees, and prepayment penalties. These fees are often tacked on in addition to the interest rate and might be covered only in the fine print.