Making the decision of applying for a business loan is harder than it seems. Not just because you’ll owe money, and if the past year showed us something, is that circumstances can change from one month to the other. But the hiring debt has its own set of questions and conundrums.

A financial genius, or maybe just a financial educated person, can easily map out the amounts, terms, payments and everything you need to know about asking for a loan. But there are other ways to figure this out for those who don’t have experience in finances.

If you are considering taking on a loan, your best ally will be a business loan calculator like the one Camino Financial has for you. This way you can make projections on how much will you owe, the terms and will find out your monthly payments. Knowing this will help you compare options and make a smart decision.

But before you run to do some numbers, you should pay attention to other business matters.

Know your business

It sounds silly because a business owner knows everything there is to know about his or her company, right? Well, more often than not, the entrepreneur focuses on its strong suite, weather is innovation, sales or client service, but neglects the financial side of a company. Sometimes, after delegating this area to an expert, the owner of the business has an idea of the business financials but no more than that.

You need to have complete clarity of your fixed expenses like payroll, rent or mortgage, supplies and electric bills and make a balance between income and expenses. This way, you’ll be able to see the actual revenue after taxes and you’ll be able to choose among the financial products out there, using a business loan calculator to figure out how much money you’ll have to include in your financial projections as debt.

business loans
Photo by Andrea Piacquadio from Pexels

Borrow for what you need

Before you even consider taking on debt, make sure you need it. Don’t just take money because it’s there. If you don’t have a goal for it, it might end up being used in things that don’t add to your business plan and you’ll end up paying for that fancy coffee machine for a very long time.

So, make a plan to grow, expand or create a new business vertical and ask for that and nothing more. The idea is that you borrow when you need it to invest in your own company’s growth and that this money will improve your business income. Knowing that will give you an idea of the available money you’ll have available to pay back a loan after the increase of income.

If you can, pay sooner

Use a business loan calculator to figure out how much money you will be paying in interest and you’ll see that, the faster you pay your business loan, your rates will go down and you’ll be saving money from your own pocket. But before you start planning what to do with all this extra money you’ll have, read your contract and make sure that you can pay out front without penalties.

This is something you need to do before signing: read every single word of your contract and if there is something you don’t understand, ask. You can compare in your business loan calculator the different choices you have available for your company and b smart about it.

Shop around and know who you are dealing with

Hidden clauses, bad client service, or untold fees can deteriorate a relationship with your chosen financial institution. If you are already about the amount of money you need, you can always call your friends to tell you their experience and even research online. Never settle for someone who promises you everything because the truth is that the only thing that doesn’t lie are the numbers.

Roberto Azarcon

Roberto has worked in the personal finance field for 20 years, particularly in the areas of financial planning.

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