Business Loans: Top 10 Questions to Ask Your Lender

In the market for a business loan? The process of researching and evaluating lenders can seem daunting at the beginning. How do you know if a lender is a good match for your business? Asking the right questions will help you understand the loan process and make you better informed to choose the right loan product. 

Below, we’ve listed the top 10 questions you should ask lenders as you do your research.

1- What kind of loan do you recommend for my business’s needs?

Different business loan products have different terms and conditions. Make sure your lender can provide a loan that meets your business’s specific financial needs and requirements. Carefully consider the loan repayment terms, interest rate, prepayment penalty, fees and any other details.

2- Do you have experience lending to businesses in my industry?

It’s always beneficial to be aware of whether a lender specializes in your industry or has dealt with companies that are similar to yours. Ideally, a lender will understand your industry or business, and provide loan terms that are reasonable for your situation. 

Avoid rushing into a loan just because a lender says “yes” to you. Your business is important, so take your time and shop around for the right fit.

3- What documents will you need from me?

Each lender will have different requirements for supporting documents, but most will need to see copies of relevant financial statements, tax returns, current business financials, proof of ownership, and more. If a lender is familiar with your industry or business, they’ll likely ask for more specific documents relating to your situation. Set yourself up for success by asking this question early on so you can be more proactive.

4- How long is the process and how quickly will I receive the funds?

Ask about the timeline for the business loan process from start to finish so that you have a full understanding of how quickly you’ll receive funding. Lenders should be able to articulate each of the steps needed to apply for the loan, as well as an estimate of how long each step will take.

5- What are the most common rates and closing fees for this type of loan?

A lender should be able to provide a general estimate of borrowing costs and closing fees for companies like yours without the need for a full credit assessment. Most lenders will have a list of fees and charges associated with their loan products, so be sure to get this information at the beginning. 

Later, if previously undisclosed fees show up at the end of the process, you can point back to this list and ask for further explanation. There are times when additional fees are warranted and may be included at the end of the loan process, but if you don’t ask, you won’t know.

6- Does the loan require collateral and/or a personal guarantee?

Before securing the loan, have a full understanding of any collateral requirements from the lender. If collateral is required, find out the specifics about those requirements. For example, will only business assets be secured by the loan? Or will personal assets be secured as well? 

Additionally, you should understand if the loan will require a personal guarantee from all business owners. Typically, anyone with ownership of 20% or greater will be required to provide a guarantee. Be sure to fully understand these requirements in advance, so you aren’t surprised later in the process.

7- What is the payment schedule for this type of loan?

Ask about what your potential payments may look like, including their frequency. Will they be daily, weekly, bi-weekly or monthly? Knowing the amount and frequency will help you determine if you have the ability to make the payments and establish a budget for ensuring those payments are timely.

8- If approved, when will my first payment be due?

Find out and make a note of the due date for the first installment. Most business loans come with fees for late payments, and late payments adversely impact your business credit. Consider setting your payment up on autopay to ensure you’re always paying on time. (Note: Many lenders require autopay as a term of their loan approval.)

9- Do you report my credit history to business credit bureaus?

Some business loan providers do report to business credit bureaus, while others may not. Ideally, you want a lender that reports to the bureaus. Why? When a lender reports on your payment performance, you’re rewarded for making timely payments through a positive credit rating. This will help unlock future loan opportunities as your business and capital needs grow. 

Of course, the other side of this equation is that you need to submit timely payments. Just because a lender might not report to the bureaus on timely payments does not mean they’ll skip on the opportunity to report on poor payment performance and ding your business credit.

10- Do you have any customer testimonials I can review?

This question is very important, as it will help you understand the kind of business lender you are dealing with. Ask for customer reviews and ratings from other business owners who have worked with the lender in the past. This will give you a good idea of their loan experience, how they handle customer service issues, and how they interact with customers in general.

These are some of the key business loan questions you should ask when applying for a loan. Do your due diligence and research lenders thoroughly before signing any agreement. Be wary of any unclear language in terms and conditions, and always read the fine print. When you’re ready to apply, use this checklist to make sure you have everything you need.

The right lender could turn into a long-term partner that helps your business succeed.

Contact LendThrive today to inquire about a business loan.

The LendThrive team understands the importance of business loans and is committed to providing our customers with the best experience possible. We offer fixed-rate business loans with terms that are tailored to your needs.

At LendThrive, we are committed to helping small businesses reach their full potential. When your business succeeds, our mission is fulfilled. Dealing with the daily operations of a small business is challenging enough. Searching for responsible capital, however, should not be. Simplify the lending process with us and gain access to fast, cost-effective funds to support your business growth.

Apply today to get the business loan you need in as fast as 24 hours, or check out our loan calculator to get a better understanding of the business loan terms.