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5 Things to Consider When Shopping for a Small Business Loan

By U.S. News & World Report

Starting a small business can be a risky financial move and almost always comes with the need for funding. Sometimes the funding can come from investors, but as a business begins to grow, many small business owners turn to banks, credit unions or other lenders for a loan. When determining where to take out a small business loan, owners should consider the following factors to find the best loan to suit their needs.

1. The terms of the loan.

Small business owners need to understand all the terms and conditions of a loan before signing the dotted line. The small business loan sector is growing rapidly, which means there are some unsavory characters looking to make a quick buck. There are also a variety of ways a lender or creditor can offer funding. Here’s what to consider:

— APR or a factoring fee: Factoring could work a few ways, but typically a lender agrees to pay the business owner a percentage of an invoice with a client. The process can be quite expensive, so calculate the cost of using factoring beforehand.

— Interest: Determine how much you’ll pay over the length of the loan.

— The payment structure: See if it is set payments for the duration of the term, or if there is a fee or interest hike in later months.

— Origination fees and prepayment penalty fees: Check how those fees factor in to the true APR of the loan.

The bottom line: Small business owners should always take the time to do the math before agreeing to take a loan.

2. How the lender determines credit worthiness.

Just like with any other form of credit or loan, not all underwriting is created equal. Small business lenders will have a multitude of requirements. Some will require that you’ve been in business for two years and generate at least six-figure income. Others may only require owners be in business for six months or offer loans based on invoices instead of revenue.

Borrowers can use these criteria to determine which small business loans they’ll be eligible for early on and avoid sending in applications that will automatically be rejected.

3. How fast you need funding.

The immediate need for funding can have a huge impact on which loans a small business owner can use. Same day or next day funding is an option, but this could come with a steeper APR because the borrower has less time to shop around and compare price points.

However, there are reputable lenders providing fast financing so long as the borrower is eligible. Here’s are a few:

Swift Capital provides $5,000 to $300,000 in as quickly as an hour on a term of three to 12 months. Borrowers must have been in business at least a year and have a minimum of $5,000 in monthly revenue as well as a minimum 550 credit score. The APR starts as low as 9.99 percent with an origination fee of 2.5 percent and no prepayment penalty.

OnDeck provides $5,000 to $250,000 in next-day funding with an origination fee of 2.5 percent and an APR range of 19.99 percent to 49 percent. Business owners must have been in business at least a year, have at least $100,000 in annual revenue and have a minimum credit score of 500.

BlueVine takes a unique spin and provides next-day funding based on invoices. The lender will pay up to 85 percent of an invoice amount with a standard rate fee of 1 percent per week with a minimum of three weeks. There is no origination fee and no prepayment penalty.

Kabbage offers a line of credit for six months with a minimum amount of $2,000 and maximum of $100,000. Borrowers pay 1 percent to 12 percent APR on the first two months and 1 percent per month on the remaining four months. Funding is available within a few days.

4. How much funding you need.

Consider how much funding is needed, and don’t forget to factor in fees. Be sure the amount needed for a loan is within the maximum amount available with a lender; otherwise it isn’t worth applying in the first place.

5. Quality customer service.

Sometimes a local bank or a reputable bank may offer the best fee, but small business owners should also consider customer service reviews. Newer entrants in the small business loan space may provide more streamlined customer service as well as a quicker response time. Test the customer service before taking out the loan.

Don’t Fear Shopping Around

It’s common for people to fear shopping around for credit because most applications result in a hard inquiry on credit reports, which will lower credit scores. Fortunately, doing all the shopping in a 30-day window typically results in the same loss of points as from one application. Credit reporting agencies understand people shop around for the best deals and won’t penalize them if it’s all done in a short time period.

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5 Things to Consider When Shopping for a Small Business Loan originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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