See How Much You Qualify For
In part 1 of this series, we highlighted 3 key DO’s for ensuring that your business loan experience is successful rather than regrettable. Today, we’ll look at 3 DON’Ts that are just as important to keep in mind.
1. DON’T assume that the only cost is interest.
When comparing themselves to firms in the alternative lending marketplace, banks are able to rely on their relatively low business loan interest rates. However, it’s important to keep other key costs in mind as well, since they will directly and indirectly contribute to your total cost of borrowng. For example, you should factor in the following:
- Your opportunity cost for having to wait months for bank business loan to be approved (if at all).
- Having to invest 20-30+ hours of your valuable time gathering, completing and submitting loan application documents.
- Fees that you’ll need to pay an accountant or bookkeeper (or possibly both) to administrate the business loan.
- All other bank processing fees, including service charges.
Once you add up ALL of the costs, you’ll likely be amazed that the bottom-line total is far more than the interest on your traditional bank loan!
2. DON’T assume that your collateral will be valued fairly or reasonably.
You may already know that all bank loans require collateral. However, what you may not know – but should be prepared for – is that banks tend to under-value your collateral. For example, the industrial equipment that you know is worth $35,000, may be deemed by your bank to be worth only $20,000. That means you’ll have to offer an asset worth $15,000 (as valued by your bank of course – not you!) if you need to secure a traditional bank loan with $35,000 collateral.
3. DON’T assume that you can pay your business loan back early.
Many borrowers who attempt to pay back their business loan early are stunned to discover that there are sometimes penalties associated with doing so. Many lenders plan on getting back at least 100% of the interest when they approve a loan, and therefore impose penalties to prevent early repayment.
The Bottom Line
As you can see, there are some unexpected pitfalls, costs and risks when it comes to applying for a business loan from your bank.
The good news is that you have the freedom to choose other options. For example, you can explore the advantages of obtaining a working capital loan through Mulligan Funding, which include:
- A streamlined online application that can be filled out in a matter of minutes.
- Rapid application assessment that is complete within 48 hours.
- Upon approval, we’ll have the funds in your account in a matter of days.
- You’ll work with a designated funding expert who will be there to support your before, during and after your loan is processed.
- There is NO collateral requirement of any kind.
- You can pay your loan back early if you wish to save interest – with no penalties.
Call Mulligan Funding at 855-326-3564 to discuss your financing options today!
The information shared is intended to be used for informational purposes only and you should independently research and verify.
Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.