3 Important Things You Need to Check in Your Business Loan Agreement

When it comes to taking out a business loan, there are many reasons why you may need one. You may have your own startup, and might need the money to help run it and manage its day-to-day operation (basically, just help it take off). You might want the money to buy inventory, so that you’re never short of stock. Or, maybe you’re already a large established business generating profits, but you need extra cash because you’re expanding operations, and want to buy a new building for your office premises. Whatever the reason may be, the fact of the matter is that without the actual loan, nothing can be achieved. This brings us to the most important document – the business loan agreement, which all business loan companies furnish as a part of the application process.

 Whether you’re getting a business loan from a bank or a private lender, a business loan agreement is a must, because it is essentially a promise to pay. It captures the willingness of the lender to provide the money, and the borrower’s willingness to repay the loan amount on time, with interest and within the stipulated time period. While everything in a contract is negotiable, we’ve listed out three things that you must check, before signing on the dotted line:

1. The APR

This is the most important factor you should check out in your business loan agreement. While it is true that most people are aware of/concerned about the interest rate, because that’s the one that’s always advertised and talked about, you should be concerned about the APR too. If you’re comparing two loan business loan offers, always compare the Annual Percentage Rate, because it also accounts for all the fees and other costs involved in the loan, besides your interest rate. Even a small difference between what was verbally agreed upon and the figure mentioned in the agreement will cost you.

2.The Loan Amount

This point may seem a little obvious, but it is worth noting all the same. While the chances of your loan provider changing the loan amount in the contract is rare, it still doesn’t hurt to check it before signing. In case you have a co-signer or a guarantor who is helping you out with the business loan, then you need to read those particular terms and conditions carefully as well. You just need to make sure that the loan amount mentioned in the agreement is the same as what you have asked for.

3.Penalties and Charges

Does your business loan have any prepayment penalties should you decide to pay off a part of the business loan early on? Also, are there any additional costs, like a service charge, loan processing charge or a late payment fee? Your business loan agreement is sure to include some (if not all) of these charges, and it’s your responsibility to be aware of the same.

Wrap Up

Before signing on the dotted line, it is advised that you are aware of all the important aspects of the business loan. If you still can’t understand certain nitty-gritties of the agreement, you can very well take the help of a lawyer to understand the same.

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