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Deciding on financing options is one of the most difficult decisions a business owner will come across. Having the knowledge, benefits, and risks from the different options often will leave many business owners feeling overwhelmed. Being able to understand the complex trade-off between benefits and costs, along with other factors such as purposes, financial products, and the different vendors to choose from.
The following chapters is to help small and medium sized businesses (SMB) to have a better understanding and remove any overwhelming feeling and confusion pertaining to loans. Zip Loan will cover several different products available in the market today that will help you leverage your business success tomorrow.
In a traditional loan the approximate amount that you borrow or that is lent to you is called the “principal” which is repaid over a specific agreed time called the “term” at an agreed “rate” with an added “interest”.
The interest of a loan is calculated at the end of the month based on the remaining principal. Payments made on a monthly basis is a fixed amount and is to be paid until the end of the term, with the loan’s balance is zero and money is no longer
The lender of the original loan is accepting to lend money to the business at a risk, with the possibility the loan may not be paid back and go into default, which is why an interest is added to the monthly repayments to compensate such risk.
The most common type of loan is called a “term loan”. This type of loan requires fixed monthly payments that includes principal and interest, which has a specific Annualized Percentage Rate (APR)
Financial institutions often go through a specific process. Along with the required documents and paperwork, several questions will be asked. Make sure you aren’t caught off guard – do your homework and be prepared!
Your loan may take a few days to a few months depending on the lender with great consideration that all your paperwork is in order and verified. The timeline from the time frame of the initial application submission to disbursement of funds takes a large amount of time on the lender’s part, so patience is definitely required. An SBA loan can take a minimum of 60 to 90 days, so if your business is in dire need for some funds fast then its best you look elsewhere.
The more established and profitable a business is, the ability for them to get larger loans from financial institutions with low rates increases. Term of 5 years or more for repayment
The basic components of factoring are as follows:
This example shows one of the key, hidden downsides to own MCS loan: the significant impact on your monthly cash flow. This borrower might not realize how server the impact of retaining only 80% of their monthly cash flow could be.
You have several financial products available to you as a business owner. Whether one suits your business better is all up to you. You also must factor in your business health, stability, assets, and future revenue. Once you decide on your best choice, make sure you have a complete understanding of what’s involved such as repayment structure and costs. In the end it is your money and you want your loan to be as beneficial to your business rather than bury you in debt.
Our highly-knowledgeable, friendly, and experienced financing professionals at Zip Loans are always eager to help you make the right decision so your business can flourish. We work for you and are looking out for your best interest as we answer all your answers and inform you on your best option. At Zip Loan we want your business to “Grow with Us”.