Our mission at United Capital Source is to be completely transparent with our customers, and to serve your business for a long time. We are proud that since 2011, the average client tenure is 4 years long so far. We get it, savvy business owners shop around to find the best interest rates on small business financing options. Here are 6 tips that will help you along the path to applying for a small business loan:
1. Know the Interest Rate Ceilings in your State
Our funding team proactively informs prospective customers that maximum amounts of interest can be charged on business loans with fixed payments in states such as Florida, New Jersey and New York. If a finance broker or small business lender is hiking up interest charges, be sure to contact us.
For instance, Florida’s ceiling interest rate is 25% on loans over 500K. In the state of New York the 24% is the most lenders can charge. In New Jersey, it is 18%! Yet in in other states there are often no limits. In California, you can charge any amount. In Chicago, lenders charge what they want. This isn’t fair on small business which is why we have provided the following five things to know before selecting a business loan:
2. Avoid emotional decisions
Have a plan and financial forecast on what profit amount the loan you’re taking will bring in and in what time frame. Don’t act emotionally based on situations, rather be rational and base your decision on facts.
3. Model in Seasons & Climate
Factor in seasonality in demand and sales forecasting. Many businesses face unforeseen events based on climatic factors. Our clients include RV park operators, water amusement parks, ski resorts and yes steak houses! I mean, who eats a big heavy meal in the summer right? We also have a
roofing small business in Michigan who doesn’t do any business in the Winter months because it’s snowing.
4. Up to date Vendor Payments
Ensure you’re current on all payments with vendors and your land lord and or bank mortgage for your business. It’s important you are not behind on payments with vendors as this can decrease your credit worthiness when business lenders are assessing your small business loan application.
5. Prepare CashFlow Forecasts
Consult your accountant or book keeper and create a cash flow forecast with varying working capital amounts to model optimal loan amounts and kinds of loans. Is it better to take line of credit as an example or do you need a fixed term loan? Remember that cyclical events can affect business costs which lower profits, which can lower the ability to repay
We have seen small restaurants and pizza chain businesses be affected by rising flour and cheese costs and lower operating margins when gas costs rose.
6. Discounts & No Penalties
Have a pay off period of length in mind before applying, always ensure you have a pre pay discount or no pre payment penalty.
Taking out a working capital loan or merchant cash advance against credit card receivables needs to be done with the above considerations in mind. Think carefully about your small business funding requirements and be sure to read more of our helpful hints in additional blog posts.