Before you go about applying for any kind of loan, it’s essential to take the time to review your situation critically. Figure out if you have any other sources for funding—whether that’s your business or just personal savings. If you can, accumulate a good amount of cash before applying for a loan.
Online business loans might be the right way to get cash in hand as fast as possible for many people. But before you fill out those loan documents, it’s important to ask yourself some critical questions.
Below we look at the top 10 questions you should ask yourself and your lender before applying for an online business loan.
1. What’s my Business Plan?
This is the most important question of all. Before you apply for an online business loan, you must have a clear idea of how much money you need and how exactly that money will be used. There are two reasons for this: You’ll have a better sense of what your business needs and how to use the loan, and if things don’t work out as planned, at least you won’t have added debt to your troubles.
2. Can I pay it back?
This is another critical question. Falling behind on payments can quickly turn a business loan into a financial disaster. You also need to make sure that you can pay the loan back in as little as three months—or at least enough time to get your business off the ground. The faster you can get your money, the more likely you will become successful in your endeavor.
3. How easy is it to use?
This might seem like an obvious question, but too many people (including some of those who are looking for loans) skip it entirely. When it comes to online business loans, you need to ask yourself whether the application process is easy to use—whether you can do it on your own or if you have to hire someone. It would be best if you also considered how many loan options are available.
4. Are there restrictions on the type of business I own?
You’ll need some kind of income for at least two years before applying for an online business loan because all the funds will go toward paying off the loan, not your business. But that doesn’t mean that you can’t have a great idea but operate without any income whatsoever. That’s OK. Just make sure that you understand the loan before you apply.
5. Why should I borrow from these people?
For a healthy loan application, it’s crucial to be able to give a compelling reason for why you need the funds—whether that’s a simple explanation of what you plan to do with the money or more depth about your business. If you have no clue as to how you’ll use the loan, how can anyone else?
6. Will I be eligible for a business loan?
Another common question that should be asked before applying for an online business loan is whether you’re even going to be eligible. This will depend on your credit and income history, as well as the type of business you’re operating. One should be aware of bad credit loans before applying for it.
7. Is there a secure repayment plan?
You must understand how the lender is going to expect repayment on the business loan. Often, it can end up being more draconian than other loans—because, in many cases, the lender has no idea whether or not they will get repaid. Because of this, they tend to have stringent standards for repayment.
8. What security will I get for my loan?
It’s essential to understand whether you’ll give out any type of collateral—or whether the lender will take something like your house, car, or other assets. In many cases, lenders will insist that you put up property or liquid cash beforehand.
9. What is the process like?
There are many online business loans out there—and to make sure you have the right one and not some fly-by-night operation, understand exactly what this loan entails before you apply. In many cases, the process is simple—but some loan processes can become very complex.
10. How much do I get?
Finally, this is a fundamental question: How much money are you getting? Many people think that they will get a certain amount of money when they apply for an online business loan, but they might not be eligible for all of it. Of course, many other factors go into this question—like the types and number of conditions on loan applied.
Many business owners make the mistake of going out and applying for a loan without first taking the time to ask themselves these questions. If you’re preparing to apply for a business loan, these questions will help you determine if an online business loan is right for you and your company.