While searching for funding, most of the small business owners and loan seekers know that lenders will ask several questions. Also, they do a long verification to check your creditworthiness. However, what you might not consider is that you should also be asking some questions from them. Most of the time a lender will work well for your business and financing. However, to assure yourself about your choice, you should ask some questions from your lender. The answers you will get will save your time and also will give the right direction for your financial needs.
Questions you should ask your lender
1. In what type of lending do you specialize?
While most of the business lenders work with all kinds of industries that meet their eligibility criteria, however, some lenders only focus on specific industries. For example, a lender who specializes in lending technology-based business owners will not approve a loan for a home. Therefore, before you go for any further procedure with the lender, ask if your industry is eligible for their funding. If there is “no,” it is good to move on, and if you get a “yes,” and also “not always, but sometimes”, then you can go for the further procedure.
2. What are your eligibility criteria?
Whenever you apply for funding to a lender, they have a list of criteria that you have to become eligible for them. These criteria might include your credit score, credit history, cash flow, credit- to- debt ratio, and collateral available. Therefore, while meeting your lender, make sure if your information meets the eligibility criteria. The answer to the question will tell you whether to move forward with your lender or not. However, if you are not eligible for the fund, then you can ask your lender where you are lagging. If there is some exception, then figure it out by improving your credit score or business plan. If you know this information, then it can increase the chances of your approval.
3. How long is the approval process?
Every lender has its period for approval, application, and funding process. Most of the lenders will verify your information in less time and approve funding. However, the lenders who have strict criteria might take some weeks or months for the funding. Therefore, it is important to understand how long it will take to approve your application. If you have an immediate need for funds, then this is so important to ask your lender.
4. What are the interest rates and the total cost?
Before you sign any kind of agreement, make sure you have the information about the total cost of your fund along with the interest rates. Also, do not forget to ask about the upfront fees, like origination fees and broker fees.
5. What is your payment plan?
Before agreeing on anything, you have to understand how you will pay back the loan. Some lenders still accept repayments through cheques. However, most lenders opt for automatic debits from your bank account. So, you must be comfortable with the repayment option and accomplish it easily. Most of the lenders want you to repay the larger amount on a monthly basis, however, others will take a small amount on a daily or weekly basis. Whatever option you will choose, make sure to stick to the schedule. Along with that, a lender can charge a penalty for earlier payment of your fund. Therefore, this is the question that is worth asking.
Therefore, funding is borrower-specific, so you need to be straightforward with your lender. The lender needs some time to understand your situation. Ultimately, they are there for your help and to find a better solution for you. Entrepreneurs can save plenty of time and money if they ask these important questions to their lender before applying for the fund. So, first, ask these questions, then go through the further process. A professional lender will always be ready to answer your questions, however, a lender who does not answer accurately, then this is not the one.