If you have more than one loan offer on the table, comparing each loan’s terms can make it easier to decide the best option for you.
First, consider how much each lender is offering. It may be tempting to pick the offer with the most favorable rate, but locking in a smaller loan than you need — even at a lower rate — won’t help cover a cash-flow gap. (On the flip side, taking out more financing than you need can leave you on the hook paying more than you can afford.)
Also, consider the loan repayment term. A short-term loan will reach maturity in approximately 18 months or less, while a longer term loan repayment period could last 5 years or more. You need to know what time frame works best for your business and specific investment.
Finally, consider whether your business is in a position to repay the loan. If the loan payments dramatically shrink your cash flow, you’ll have to consider how comfortable you’ll be working with a smaller margin for the duration of the payoff term.
As you set out to secure funding for your small business, a short-term loan repayment calculator is an excellent place to start. By experimenting with different loan amounts, rates and terms, you’ll come away with a clearer understanding of what you can and cannot afford, as well as what repayment terms are manageable given your cash flow.