When you obtain a business loan, you’ve got the capital to get your business off to a strong start. It’s exciting! But before you sign all that paperwork, read it over in its entirety. Look out for these hidden business loan fees before applying.
When you fill out a business loan application, your lender will run a credit check and review all of your business’s financial paperwork. Most lenders will charge fees for their time and effort; ask about those fees before applying.
Paying off your loan on time is essential, lest you incur:
Paying off your loan early may take a load off your mind, but some lenders will charge you prepayment fees. After all, when you pay back your debt “too” far ahead of time, they’re missing out on years’ worth of interest.
Late Payment Fees
Some lenders understand that you’ll make a late payment or two, while others are firmer about their policies. Are you paying monthly or quarterly? Read the fine print. A late payment fee could be either a flat rate or a percentage of your loan amount.
Insufficient Funds Fees
If you turn on auto-pay to make those loan payments, make sure there are always sufficient funds in your bank account to cover it. When your lender doesn’t receive the full payment because there’s not enough cash in your account, they’ll likely charge you a flat-rate fee.
If you apply for and are lucky enough to receive an SBA (Small Business Administration) loan for your new business startup funding, you’ll be obligated to pay a guarantee fee. This is a fee from lenders that guarantees the vast majority of your loan. These fees are usually due within 90 days after your loan is approved.
Closing costs aren’t just for mortgages. A small-business loan is a big deal—starting your own business affects your life just like buying a house does. Processing fees, administrative costs, and other miscellaneous fees get rolled into the closing costs. Still, ask your lender plenty of questions before you sign anything to make sure you know exactly what’s in those closing costs.
When you apply for a small-business loan, get ready to read through a great deal of fine print. Don’t let additional costs take you by surprise; be prepared by reviewing these hidden business loan fees to be aware of before applying.