Questions to ask before seeking financing

Getting a loan for your small business may be a daunting task when the need arises. The bad news? Conventional business loans from traditional financial institutions could be nearly impossible. The good news? You may very well qualify for alternative financing by accessing funds for your business through peer-to-peer lending instead. With a myriad of such options available in the marketplace, here are some tips and questions to ask before you make a decision.

Will this lender work with me?

As the first step, check your eligibility. Certain peer-to-peer lenders cater to specific company sizes, industry or growth model. We recommend visiting their website or even to simply give them a call for more information. Don’t be afraid to ask and clarify any doubts you may have.

What financing options do my business qualify for? 

Every business is unique and this means your business model may require different funding needs from others. Narrow down your loan needs and pair it with the financing options available in the marketplace. Options can include equipment financing, invoice financing, purchase order financing or simply unsecured working capital loans. Plus, check the repayment terms, fees and charges applicable for each loan type to see what best fits your business scenario and needs.

What is the length of the loan?

It is important to be sure if you are able to afford the loan while growing your business. Before obtaining any short-term financing and signing the loan contract or documents, you must consider the reason for the loan, and that you are well aware of the terms and conditions of the loan product. More importantly, you need to be absolutely certain that the bridges your cash flow cost-effectively and does not put undue financial pressure on your growing business.

How can I get a reasonable interest rate?

Any business loan incurs interest and rates vary depending on your business and your qualification as a borrower, the type of loan, duration and the lender. While interest rates for small business loans from traditional lenders such as banks are generally lower, they are also less flexible, often takes longer for an approval decision, and have a longer list of eligibility criteria including requiring assets to be pledged. For small businesses who are unable to obtain bank financing or loans, alternative lenders could be a very viable option. By leveraging technology and delivering innovative new loan products that underwrite very differently from traditional lenders, peer-to-peer lenders are able to offer competitive, affordable rates compared to other lenders in the market.