Financing questions

Questions to Ask When Seeking a Small Business Loan

You have many options to get working capital for your small business to ensure you have enough cash flow. Here are common questions to ask to help you find a small business lender that best meets the needs of your company.

  • Are you a broker or a direct lender?
  • What does it take to qualify for funding from you?
  • What’s your loan process and procedures?
  • Do your clients have a credit line amount? If so, how do you determine what it is?
  • If my business grows quickly, how will your financing keep up with my business?
  • What restrictions and costs do you have if I end a financing agreement with you? If I decide to leave the relationship after three months, would it cost me?
  • May I get references to contact about the quality of service your firm provides?
  • Do you require personal guarantee from company owners?
  • With whom will I deal with on a day-to-day basis?
  • Do you have a credit committee?
  • What happens if a default occurs?
  • Can the loan be transferred or sold?
  • Will you have access to my bank/checking/PayPal/etc. account? If so, will you ask for my login ID and password?
  • What is the total interest I will be paying for the duration?
  • Is there a penalty for paying back the loan early?

Fees to ask about

  • How do you determine your fees?
  • Are your fees a flat fee or proportional to time?
  • Do you have the following fees? If so, what is it?
    • Application fees.
    • Line fees.
    • Maintenance fees.
    • Origination fees.
    • Hold back fees.
    • Transaction fees.
    • Monthly fees.
    • APR.
    • Interest rate.
    • Any other fees.

Questions for factors who do invoice financing

  • How long does it take to sign up a new client? What are the set-up fees and are they refundable if you’re funding my business?
  • How fast do I receive funding from you after I send you the invoices?
  • How do you send money? What are the charges for expedited services like wire transfers?
  • How do you interact with my customers?
  • Must ALL my clients’ invoices need to be funded through you if I work with you?
  • Do you bear the risk if my clients files for bankruptcy or do I?

What other questions would you ask?

Image credit: Jim Sneddon

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