When it comes to borrowing money, doubts are always eating up your peace of mind. But there is nothing like an evening of hard work running numbers to understand a financial product to recover that tranquility.
So, before you go off and sign a contract, you should be planning a little, learning how small business loans like these we found in Camino Financial works and how all that can be included in your business plan.
Since you already know your market, your business, and your targets, it’s time to learn the numbers that come with a solid business plan and understand your repayment capacity so you can choose the option that makes sense to your expectations and goals for your company.
Here are some ways to figure out if you can pay back small business loans:
Write down a business strategy
By doing this, you would know how much money you need to execute it and where you will invest it, the return time and revenue you expect to have, and, therefore, the funds you’ll have to pay back what you owe.
Know the cost of your loan
Consider administrative fees, penalties, APR, commissions, and every expense that comes with a loan. This way, you won’t be over your head when the first statement comes in. Before you acquire debt, make sure you understand your contract and how much it will cost you. Remember: money is not for free, and borrowing has a cost. Make sure you can pay for it.
Have a structured financial projection
Keeping track of income and expenses is not only useful to pay your taxes, but it’s also a picture of the health and performance of your company. Write a financial statement and turn it into a projection, according to your current income and expenses. In your plans for the future, you’ll be able to have a clear picture of your payment capacity and, in so, you can ask a financial institution for the money you need.
Know your payment plans
There are many options for small business loans, and they can be as different as your imagination can be. Some are bound to monthly payments; others will be quarterly. If you know these specifications and have a solid business and financial projections, you can choose the one that suites you better. Like, if you know your income will be higher every few months, you can choose a quarterly plan and save money for the due date instead of scrapping the bottom of the barrel each month.
Use a business loan calculator
This is a tool that can help you calculate, against your real balance, how much are you going to pay every month, including interest rates and, in case you are looking for a loan that suits your current capacity, you can start running numbers to have a good idea of what kind of business loans to look for.
Don’t forget to consider special terms of each product like collaterals, your credit score, your previous experience, and even take the time to ask around to see if a financial company or product works the way it stipulates so you can make the best choice.
Always remember that your payment behavior will be noted by the company you decided to work with. If you behave properly, you can start a long and strong relationship with a funding provider, so do as much math as you want to make sure you won’t default on your payments and always have a plan B if something goes wrong.