Keys to getting the loan rates you want

The majority of businesses are going to need a loan. Some businesses may need a loan to start up the business in the first place, whereas others may need a loan somewhere along the way during the life of the business. No matter when a business needs a loan, the business owner will want to try to get the best loan rate they can. This article discusses the keys to getting the loan rate that a business owner wants.

Shop around

Just as people shop around to different stores before they buy furniture or appliances for a home, a person should shop around at different banks for a loan.Shopping around is key to getting the loan rate that the business owner wants. One bank may be willing to lend the business owner the money whereas another bank may not be willing to take the chance. And the rate on one loan from a certain bank may be different than what another bank is offering. If a business owner does not like the loan rate that one bank is offering they should check out a few more banks to see what they are offering before giving up or locking themselves in with a loan rate they are not happy with.

Collateral

Banks want to take all the precautions they can to make sure that they will get their money back. Because this is the case, a bank will usually give a better loan rate to a person who is offering collateral. If a business offers their inventory or any real estate they own as collateral on the loan, the bank is likely to give them a better loan rate.

A good business plan

A good business plan is another great way for a future business owner to get a loan rate they want. If a bank can see that the business owner has good ideas for the business and a solid plan to make money they are more likely to give the business a loan with good interest rates. It is a good idea for a person to take a lot of time writing out their business plan. Not only will it help their business be successful, but it will encourage the bank to provide them with the funding and a good loan rate in the first place.

A good credit history and a good credit score

For a new business owner who is attempting to get a business loan for the first time, he or she will need a good personal credit score. When a person goes to a bank to get a business loan the bank will want to see their past financial history to see what kind of rate they should give the person on the loan. Since the person has not had any previous business financial history because their business is new, the bank will have to look at their personal financial history to get an idea of whether the person is likely to pay back the loan.

If a person is going to the bank to get a loan for an already existing business, the bank will look at the credit history of the company. They will look to see if the business had made their payments on time on business credit cards or previous loans etc.

Building the credit history

Because having a good credit history and a good credit score is key to getting the loan rate that a business owner, or future business owner, wants, they first need to build a credit history. A person can build a personal credit history by using credit cards and paying them off on time and they can take out a loan for a car or a house and pay off the payments early or on time. A business can build their credit history by paying off their business loans on time, and using business credit cards for business expenses.