Once you have been approved for a loan, you need to work with the lender to obtain terms with which you feel comfortable. The due date and manner of payment will need to be determined. Will you pay the loan back in one lump sum or in various payments on a set schedule? Make sure such a payment schedule will work for your business in conjunction with your projected cash flow.
You will also want to look at other fees associated with the loan and what is considered a default of the terms of the loan. Read the loan agreement carefully and have a lawyer review it as well.
Propose a repayment plan. Examples of different methods are a line of credit, payable at your discretion but subject to renewal annually by the bank, and a term loan payable monthly over a number of years.
Additional Considerations for Success
- Be a good customer so you can get cooperation if you need help later. Stick to your agreement. Make sure you understand the requirements and perform to them as much as possible. In a business relationship, lenders will ask for regular financial statements, which you should produce on time.
- Be proactive. Contact the lender if there is a problem. Stay in touch even if nothing new is going on. Most lenders have some flexibility. They appreciate that you are thinking about paying them back instead of just getting the money.
- Being well dressed and neat in appearance at bank meetings will reflect well on you.
- Keep your lenders informed on the status of your business.
- Be prepared to discuss any prior credit issues/problems.
- Stay focused on your business needs and be conservative and realistic. Avoid giving the impression of being overly optimistic.
- The primary purpose of the borrowed funds should be to grow your business. Don't spend the money on expensive entertainment, etc.
- Evaluate your financial situation regularly to minimize your risks and to limit losses to a predetermined limit.
- It is advisable to start by approaching institutions where you already do business (e.g. your mortgage lender). They already know you and you should have a track record that is established with them.