(BPT) - Starting a business can be tough. Growing one can be even harder.
Dr. Nacondus Gamble knows this all too well. After her optometry practice, The South Eastern Eye Center, began to establish a reputation for great patient care, Dr. Gamble decided she was ready to expand. So she began looking for business financing to open another location in Georgia. That's when she discovered that many lenders don't share her commitment to high-quality service.
"I called a couple of places, but I just felt like they were taking advantage of me," she said. "It was unnecessarily harsh."
Dr. Gamble ended up borrowing through Funding Circle, an online platform focused exclusively on small business loans. Known for its speed, transparency and customer service, Funding Circle has helped more than 40,000 businesses around the world get financing, says co-founder and U.S. managing director Sam Hodges.
Today there are more options than ever before for businesses looking to grow. While some of these newer options can offer a significant leg up, others can actually end up doing more harm than good.
So how can you get the best deal on a business loan? It helps to watch out for these three common mistakes:
1. Not understanding the true cost of your loan
When shopping for a business loan, it's easy to become overwhelmed by fast-talking salespeople, endless strings of acronyms and confusing terms. If it's unclear how much you'll really pay for financing, that's a good sign you should walk away, Hodges cautions.
A good lender will always be willing to help you calculate the Annual Percentage Rate (APR) and explain all the terms of your loan clearly. They'll also help you understand what fees you can expect over the life of the loan - some lenders sneak in additional hidden fees, concealing them in fine print or confusing legalese, which can significantly inflate the cost.
2. Getting trapped in daily or weekly repayment cycles
Some types of business financing can seem like a godsend for a company in need of fast cash. These providers promise easy approval with quick access to funds. However, that speed can come at a steep price - in many cases, the provider takes a portion of your sales on a daily or weekly basis until the debt is repaid.
Term loans are often the better option, Hodges says. They allow businesses to borrow a set amount of money for a specific purpose, like hiring new staff or stocking up on inventory. The funds are then paid back over a set amount of time, with consistent monthly payments and no surprise fees.
3. Not knowing what you deserve
While many finance providers have your best interests at heart, the truth is that not all do. Some use irresponsible or misleading practices and take advantage of small business owners' need for cash.
After seeing countless small businesses get stuck with credit products they couldn't afford or understand, a coalition of small business advocates, lenders and online credit marketplaces came together to launch the Small Business Borrowers' Bill of Rights. As the first-ever gold standard for responsible business lending, the Bill of Rights outlines the rights and safeguards that small businesses should expect from finance providers.
These include the right to transparent pricing and terms - ensuring business owners can see the cost and terms of any financing being offered in writing and in a form that is clear, complete and easy to compare with other options - and the right to non-abusive products that won't trap you in an expensive cycle of re-borrowing. Before you take out any financing, check if your lender has signed on at ResponsibleBusinessLending.org.
Considering a loan for your business? You should know the five things business lenders typically care about when evaluating your application. To maximize your success, read more at www.Made2DoMore.com.
Caption 1: Dr. Nacondus Gamble, owner of The South Eastern Eye Center, an optometry practice in Georgia, found a business loan through Funding Circle.
Caption 2: Dr. Nacondus Gamble, owner of The South Eastern Eye Center, an optometry practice in Georgia, found a business loan through Funding Circle.