7 Questions to Ask Your Advisor Before Getting a Small-Business Loan

If you are an entrepreneur who needs additional funds for your business, the idea of getting a small business loan may enter your mind as it is usually perceived as a quick and easy solution to capital shortage. Almost all commercial banks and financial institutions offer various loan products that target business owners that need funds for expansion, equipment purchase, and a lot more.

Financing a business with debt means you’re borrowing money from a lender and you’ll pay for it with interest. While it is common forentrepreneurs to consider debt financing as an option, it doesn’t mean that it is ALWAYS a good decision. Effective financial planning is necessary for any business to succeed and this is where the importance of financial advisors comes in.

Financial advisors have the skills to provide accurate projections, objective observations, and timely insights that will promote business growth, so we highly recommend that entrepreneurs need to consult first with a financial advisor prior to applying for a business loan.

Now here are the 7 Questions to Ask Your Advisor Before Getting a Small-Business Loan:

  1. Is my business idea suitable for my target market?

Putting up or running a business may seem exciting at first, but in reality, not all entrepreneurs with great business ideas become successful. Whether you’re about to jump start a business or go for expansion, it is always necessary to consult with your financial advisor first to get an objective opinion about the feasibility of your business ideas and if it is worth getting a loan for.

  1. Do I really need to get a loan to fund my business?

While it is a common option for entrepreneurs to apply for a loan whenever they need additional funds for their business, this doesn’t mean it is always a good idea to go into debt financing each time you need money. Your financial advisor can help you assess objectively the benefits and risks you will get for every loan agreement you’re thinking of getting into.

  1. What type of loan is best for my business needs?

There are many loan products and services that commercial banks and other lending institutions offer to entrepreneurs. Having a lot of options can be confusing, so asking for your business/financial advisor’s expertise on this matter will help you determine which option best suits your business needs. Remember that debt financing can make or break your business, so choosing the right loan product is always crucial.

  1. What type of lender suits my business needs?

A lot of entrepreneurs prefer getting small business loans from commercial banks, but truth be told,they have stricter and more conservative policies. Not all entrepreneurs who apply for a loan can get an approval, so it is always a wise decision to know all possible options you can get. Other than banks, you may also get a loan from credit unions and consumer finance companies.There are many available sources online that can serve as a guide and Bizit is a good place to start. This site offers extensive reviews on various types of lenders and loans available in the market.Your financial advisor can help you understand the advantages and disadvantages of each type of lender and determine which one you should go for.

  1. How much money do I need to borrow?

Knowing the right amount of money, you should borrow from a lender is a complicated matter as it involves many factors to be considered. Without proper knowledge on managing business finances, it is dangerous to just jump into debt financing. Finance/Business advisorscan help entrepreneurs realistically estimate the loan amount they should apply for. 

  1. Am I qualified to get a loan?

Every lender has their own set of requirements that potential borrowers must accomplish, but one major factor that banks take into consideration is a borrower’s credit score. While entrepreneurs with good credit standing have better chances of getting a loan approval, it doesn’t necessarily mean that borrowers with bad credit scores WILL NO LONGER be granted any kind of loan. There are many alternative lenders that do not rely on credit scores and they still grant loans to borrowers with zero or bad credit standing. Your advisor can definitely evaluate your qualifications objectively to help you set proper expectations about your loan application.

  1. What repayment option for loan is best for me?

Choosing the right repayment option that perfectly fits your financial situation is a crucial matter.It can either make or break you. Your financial advisor’s expertise can help you select the most appropriate repayment schedule that matches your financial capacity.

Here are services you may want to consider:

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