There are many moving parts when it comes to securing a small business loan, so there are naturally many things that you will need to ask your lender upon completing your application. You are going to have questions popping in your head left and right, and it will be difficult to remember them all. While not exhaustive, this list is a good start on making your own list of questions to ask your lender.
Ask About Security
Will you need collateral? What types of collateral are accepted? Will what you have to offer suffice? Can you offer up several different types of collateral to get to the value necessary? A secured loan is the most common type of small business loan. It helps mitigate the banks risk, and in turn lowers the borrower’s interest rate. It can be a complicated issue however, so you need to ensure you understand the process from the beginning. Remember to ask about the process in the unfortunate circumstance that the bank has to take possession of the collateral.
Ask About Fees
It is likely there are fees included that, while noted in the documents, have not been mentioned or explained to you verbally. Ask about those, and ask that they be explained and pointed out to you in the paperwork. A clear understanding of all fees involved on the front end is better for both parties.
Ask About the Interest Rate
Of course you should know what it is, but ask also if it is fixed or variable. If it is variable, how is a change handled. If it is fixed, is there any circumstance in which it could change? Ask if and when refinancing could become an option.
Ask What is Needed from You
Of course they will ask you for information as they need it, and some lenders are on top of things with a checklist and even organizers in some cases, that can help borrowers get the needed information in order. Do not let them get by with just asking as they go. Ask up front what they need from you, make your own list if needed, and get on it.
Ask What Could Delay the Process
Of course there are the obvious hold ups, like you not getting them what they need when they need it. What you want from this question is what else could happen. Are there things that could go wrong on their end? Could something come up in underwriting that would require more information?
Ask About Qualifying Guidelines
You need to know these on the front end for two reasons. First, if you do not meet them you can move along before you waste any more time. Second, if you meet them see there is an issue that needs to be tended to, you can take care of it now, rather than later. For example, if you are a co-signer on a loan with someone else, yet you do not make the payments, you will likely need to show that the other person does make the payments regularly and you are unlikely to become responsible for the loan.
Ask About Pre-payment
Can you make additional payments on the loan in an effort to pay it off early? If you do, is there a penalty for that? If there is a penalty, what is it and how does it work? Is it in the form of points? Is it best to pay extra as you can or save it all up and pay the loan off early in one lump sum when possible?
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