A loan can either bring a business to new heights or disrupt the cash flow and bring a company down to oblivion.
Prominent finance gurus Dale Clarke and Ryan O'Shea shared some expert advice to Forbes.com's Garrett Gunderson.
In a nutshell, there are 3 Cs a borrower must take into consideration to get the best loan terms and bring business to brand new heights.
Credit
Having good credit scores can make it easier for you to qualify for a loan and get a more attractive interest rate. But a bad credit or having no credit history at all will make it hard for you to not get a loan or even never get a loan at all. You must have a 720 or higher credit score to protect you from certain errors that may get into your five credit report. A 780 credit or higher will give you the best interest rates.
At some point, you will have to start with no credit history. The best way to have credit history is to get a credit card. Make sure you pay your bills. Minimize your debt as much as you can. Make sure you regularly check your credit to make sure you are not going overboard.
Cash Flow
If you have a healthy cash flow, you can easily avail a loan and get better interest rates. You must show the banks that you make more money than you spend. The difference between your gross income and your loan payments should be 65%. Some take a 15-year home mortgage repayment than the 30-year plan. But this will make your monthly payments bigger. This will hurt your cash flow and your chance for another loan from the bank.
Collateral
Auto loans and mortgages charge lesser interest rates than credit cards because the bank can get your car or your house if you fail to pay them back. This means having collateral can make it easier for you to get a loan and better interest rates.
Before you get a business loan, you must consider the term of the loan, how your credit worthiness is considered, how fast you need the money, how much money you need, and if the banks customer service any good.
Make sure you have you three Cs in line to make sure you get the best out of the business loan you are applying for.
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