For many business owners the Small Business Association or SBA is an invaluable resource when it comes to getting a loan. In most cases you will find that your bank will not work with you unless you have a well-constructed business plan. In some cases, however, you may be able to negotiate a lower interest rate on your loan through the SBA. Here are a few things you should know about working with this third party lender.
One of the things you will want to learn before working with any bank is how they set their interest rates for loans. The way that banks determine the interest rate on a business loan is by figuring the annual income of the business and the amount of capital it has. This includes the total assets as well as the liabilities. After they deduct the total assets of the bank then divides the amount of capital it has by the total annual income to get the business loan rate.
While most banks base their interest rate off of the total assets of the company, some will also consider the credit ratings of the owner. If the owner has good credit, the bank will feel more comfortable offering you a loan because of this. If the person does not have good credit, the bank will be less willing to lend money to that person. This can be a factor in negotiations, but it is always worth talking to your banker about it.
Sometimes the SBA can help you negotiate an even better interest rate. Often this can be done by having the bank to extend you a loan if you have certain things in your business plan that can help you attract investors or customers. For instance, you might have a very good chance of getting investors interested if your business has some unique qualities or a product that no one else offers. In this case you will want to make sure that you let your banker know about those special qualities.
It's important to remember that the interest rates you are quoted at depends upon where you bank and which lender you talk with. Some banks are more lenient than others. If you plan on using the loan for investing or growing your business then your bank probably will be more helpful. If you are just looking to get a loan for starting your business it will depend more on the terms of the business. You should get quotes from at least three different banks and compare them. This will help you choose the best deal for your business.
When looking for a great interest rate you should always ask questions. Find out what conditions the interest rate is based on and how it factors into your fees. If you do not understand the terms of the interest rates you are being quoted you can always call a representative of the bank to discuss it further. They are usually available to do so during normal business hours.
Finding a great interest rate can mean the difference between having a great investment and losing it all. It is essential to know this information before you sign any contracts. By comparing interest rates from several different lenders you can make an educated decision on what the best rates are . . . . . . for your type of business. Also, you may find a better deal online. By doing a quick search in Google you should have no problem locating a site that will allow you to compare several rates. This is a much faster and more convenient way to find your best deals on both loans and interest rates.
Be wary of any offers that sound too good to be true. Just because you have been offered the lowest possible rate does not necessarily make it so. It is important to only take out loans that you can afford to pay back. Remember that you get what you pay for so always go for the loan that has the lowest rate and fees. The best thing you can do for your business is to get a loan from an honest and reputable lender such as HDFC bank.