Taking Out a Loan: A How to Guide
Taking out a loan has become something that people are sometimes too afraid to do because they are worried about being able to pay it back, that it is illegitimate and that they will then have this debt hanging over them for years to come. But times have changed and the way we can take out loans is improving. So, if you’re a new business owner and are looking for ways to finance your new business, then it might be time to consider taking out a loan.
This article provides you step by step in how you can achieve the outcome you want without feeling anxious about it.
Create an Investor-Ready Business Plan
As a business owner looking to take out a loan, you need to ensure that your business plan is something that investors are going to think is full proof to make back money. This is probably one of the most important things you can do when taking out a loan as this is what investors will be looking at and making their decisions on. It will mean you will need to set aside a lot of time working on it, showing them how it is sustainable for the future, what makes you different to other companies – make sure that your brand is unique and will stand out.
Check Your Credit Rating
You need to see what your credit rating looks like as this will impact the kind of loan you get offered. Knowing and understanding the situation you are in will make it a lot easier when trying to get a loan. For example, if your credit rating is not great, then you might be offered a more expensive deal. Remember if you apply to be approved it won’t affect your credit rating.
Find Support For Businesses
While saving up for financing your business is a great idea it can be very time consuming and will take a lot of hard work and long hours for you to do so. Therefore, if you want something a lot faster, then you should consider taking out a loan. For any start-up this is often a long and tedious process quite often ended with the company not receiving any finance at all because they’re not ready for investment.
This can be difficult to deal with, but there are companies that offer business loans support, such as Acceler8me that will help you find the loan that is perfect for you. They will help you become investment ready and save you the hassle of shopping around trying to find the best deal.
The one thing you need to understand when taking out a loan is how interest works. When you take a loan, technically speaking you are using someone else’s money. The cost of doing so is paying the interest on top of paying back the loan. This is calculated as a percentage and will be dependent on the size of the loan; for example, for a £1000 they will want a 10% interest. They will decide how long you have to pay it back and if you don’t pay it back within the time the interest will increase.
Look at Borrowing More
As crazy as this sounds, actually applying for a larger loan will benefit you because the more money you take out, the cheaper the interest rate will be. This doesn’t mean getting multiple loans, it just means instead of asking to borrow £4,999 and paying back at 13.9% interest, you could borrow between £5000 to £7000 and only have an 8.9% interest rate, which will benefit you in the long run.
Pay it Back as Soon as You Can
The later you leave paying back the loan, the more interest you are likely to pay. Therefore, as soon as you start making money from your business, look at paying back the loan you took out when setting up the business. However, it is good to check that you won’t get charged for paying back too early.