What Is The Cost Of Business Loans In Nova Scotia
The cost of small business loans in Nova Scotia varies widely based on how much you borrow. The following factors will help to determine how much you have to pay back:
- Principal. This is the amount you borrow without interest or fees. This amount will be deposited into your bank account when you take out the loan. Some loans will cap you at $100,000 while others may range between $250,000 and $1 million.
- Interest rates.Business loan interest rates are a percentage of how much you borrow and will depend on factors such as your credit score. They often range anywhere from 4% to 40%. Youll usually get lower interest rates if you sign up for a secured or guaranteed loan.
- Fees. Lenders may charge fees to set up or maintain your loan. Youll usually also need to pay fees to pay your loan off early or to make late payments.
Sample cost of small business loans in Nova Scotia
Sally has been running a business in Nova Scotia for several years and decides to take out a business loan for $100,000. She negotiates a loan with 6% interest, a term of 5 years and a 1% administrative fee. This is what her loan will look like:
Final Thoughts On How Business Loans Work
Business loans are excellent tools for increasing your liquidity so that your business can thrive in good times and bad. However, its important to know how loans work in general, as well as the terms and conditions of any particular loan you are applying for.
Reputable online lenders are as transparent as possible, both on their websites and in their communications with applicants. Predatory lenders, on the other hand, tend to hide behind too-good-to-be-true advertising, while offering few specific details about their lending products. Before signing on for a loan, make sure you understand how much your payments will be, how frequent they will be, and how much you will pay for the loan in total. Use our small business loan calculators to help figure out these important details.
And finally, here are a few more educational resources we think you might find helpful in your research about small business loans:
How Do You Get A Business Loan
Applying for a business loan takes time. Regardless of what type of loan youre applying for, there are several steps you can take to prepare yourself before submitting an application.
Depending on the lender, applying for a business loan can take anywhere from a few minutes to several hours. But taking on a potentially significant financial obligation at the outset of a new venture is a major decision, especially for entrepreneurs launching completely untested business ideas.
At this stage, a little planning can save you a lot of effort later on.
How Can I Get A Loan To Grow My Small Business
Some small business owners wait too long to expand by then, it may be too late. Failing to deliver on growth demands can mean the end of your business. Fortunately, there is capital available for business expansion.
With the right loan to expand your small business, youll put your business on a path for future growth and success. However, growth requires more than money a successful, sustainable business growth strategy coupled with the right amount of capital at the right time is highly recommended.
Determine How Much Money You Need
It may seem obvious that you should determine how much money your business needs before you start looking for a loan, but dont skip this step for three reasons:
- 1. The bigger your loan, the more you will pay toward interest. Your loan is an interest-bearing debt that will weigh on your balance sheet. You want to pay off your loan as efficiently as possible. The more you pay toward the principal, the quicker that loan will disappear from your business liabilities.
- 2. Lenders make money on your interest payments. Accordingly, lenders want you to pay interest for as long as possible. If you know how much money you need before you talk to the lender, the less likely you are to fall victim to a lender convincing you to take out more money than you need.
- 3. Loans affect your credit score. Too much debt negatively impacts that score. The less debt you take on, the less likely the loan will bring down your credit score.
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Can I Get A Business Loan With Bad Credit
Although youll likely find it tougher to get approved for a small business loan with bad credit, its possible. Some lenders specialize in offering business loans to borrowers who have bad personal credit scores. However, If approved, a lender will most likely charge you a higher interest rate.
To receive a lower interest rate and boost your approval odds, consider applying with a co-signer who has a good credit score and decent income, if possible. A co-signer is someone who agrees to repay your loan if you default. Before you ask someone to co-sign for you, make sure they understand that a missed payment can cause damage to their credit.
Choose The Right Small Business Loan
When it comes to small business financing, lenders will always ask about the why. Why do you need a loan for your small business? Having that answer fleshed out is crucial for you as a small business owner, but it will also lead you to understand what type of loan you need.
There are 3 main types of business loans to focus on:
An SBA loan is a small business loan partially guaranteed by the government. This removes some of the risk for SBA lendersthe ones issuing the actual loan. Surprise! The SBA arent the ones doing the actual lending.
The SBA works with pre-approved financial institutions , so lending for small businesses is more frequent and comes with better terms. This is possible because the SBA partially guarantees that the lenders loans extend to small businesses and small business owners.
On top of better frequency and rates, SBA loans have high maximums
Startup Financing Options
There are many pros and cons to using business credit cards and personal loans to finance a small business.
Sure the convenience of credit cards is one of the most attractive features, but there are many more benefits to using credit cards beyond that. Here are some of the main advantages of using credit cards for financing:
On the flip side, there are obvious risks involved in using credit cards to other financing options:
Business Line of Credit
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What Are Online Lenders
If you dont want to wait weeks or months to go through the process of applying for a first-time business loan through a typical bank, credit union, or SBA lender, and if youre willing to accept a higher interest rate on the money that you borrow, you might want to consider an online lender.
Online lenders, also called alternative lenders, help small businesses get access to loans and lines of credit quickly, sometimes in a matter of minutes. These lenders often are willing to work with business owners with bad credit, with new businesses that dont have much time in business, and also are flexible about how to assess a businesss creditworthiness. For example, if you dont have a business credit score, but do have a track record of online sales, you might qualify for a first-time business loan from an online lender.
Check out our list of best online lenders for small business loans.
Apply For The Loan Then Hurry Up And Wait
If youre applying for a substantial amount of money, youll want to allow your business plan plenty of lead time. Depending on the loan and lender, the loan application process can take months. Using some avenues, like lending marketplaces, can speed up the application and approval course, but in most cases, actually getting the money isnt an overnight proposition for startup business loans.
Beyond the loan amount itself, tacked-on fees can take you by surprise if youre not paying attention. Keep an eye on loan application fees, SBA loan guarantee fees, early repayment fees, and late repayment fees, as theyll eventually affect your annual percentage rate . By now, you should have a reasonable level of comfort with your ability to repay the loan on time and with the payment schedule, the APR, and the included fees. If theres also a tiny bit of trepidation, thats naturalyoure a small business owner it comes with the territory.
Browse hundreds of loan options, custom-tailored to your business and budget needs, from a single, simple platform.
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A Business Line Of Credit
A business line of credit is a revolving loan that comes in two forms: secured and unsecured. It works a lot like a credit card but with better features. Business lines of credit typically have lower interest rates and higher credit limits. Moreover, a business line of credit can be used for cash advances.
How does it work?
You can reuse a business line of credit as many times as you like so long as you make payments on time and dont go over the credit limit. Similar to the credit card, as you pay off the amount used, you regain access to those funds. So, if you have $50,000 and access $20,000. You only have $30,000 left. But if you pay off the $20,000, youll have access to the $50,000 again.
What can you use a business line of credit for?
A business line of credit is typically used to finance a businesss short-term needs like day-to-day operations, paying suppliers, or to help with cash flow problems.
How much can I borrow?
The amount you qualify for depends on if you get an unsecured or secured line of credit and how much you can afford. Lenders will typically have a set of requirements that youll have to meet to determine the amount.
Fastest Loans: Small Business Financing In Days
- Merchant cash advance: Borrow against future earnings for rapid access to capital.
- Short term loan: Quick financing for when you expect a quick return.
- Business credit card: Make your everyday expenditures work for you.
- Accounts receivable financing: Borrow against unpaid invoices for working capital.
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Terms To Watch For In A Business Loan Contract
Besides the type of loan you apply for, consider the details of the loan. Each loan comes with its own interest rate and loan term, among other points of consideration that are as equally important as the type of loan you take on. It’s important to read the contract in full to make sure there aren’t hidden terms or fees.
When applying for a bank loan, check the following:
- Rates: Aside from the amount of money you wish to borrow, the loan rate otherwise known as the interest rate is something you absolutely must determine. Loan rates differ based on the type of loan you’re seeking, the bank you’re borrowing the funds from and your personal credit score, among other things. When seeking out a business loan, you want one with a low interest rate, if possible. Depending on the type of loan, you may see rates range anywhere from 3% up to 80% annual percentage rate.
- Term: A business loan’s term is the length of time you have to pay the loan off. Like the loan rate, you generally want a shorter loan term if you can afford the payments. The longer your rate is, the more interest you will pay over time and the more your loan will cost overall.
- Banking relationship: To be considered for a bank business loan, many institutions require that you have an existing relationship with them first. If this is not the case, you’ll need to open an account with a bank and establish a working relationship with it over time.
Keep Building Your Financial Profile
Improving personal credit, establishing business credit, paying down existing debts, maximizing income, expanding assetsthese are all ways to build up your financial profile for future growth. It may seem backward, but banks prefer lending to businesses that dont desperately need the money its in your best interest to negotiate from a position of capital power.
The experience is also a major plus. Youll be more prepared for your next loan, which could come years down the road orcurb your anxietymuch sooner due to an emergency or another unforeseen circumstance.
While running your own operation doesnt necessarily get easier, your future small-business loan processes will become more painless going forward, now that youve begun building your financial profile. Establish and build your business credit, and then youll be able to rely upon yourself rather than Powerball odds.
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When Is It The Right Time To Apply For A Business Loan
Considering the fact that you will be assuming a certain amount of debt when you take out a business loan, you want to make sure you are doing it for the right reasons. Youll be responsible for making regular payments, and failure to do so can have a negative impact on your credit and financial profile.
That said, there are some sound reasons why you may want to take out a business loan, including the following:
You want to build business credit As a business owner, building a strong credit score is important . Without it, it will be difficult to get approved for any loans in the future. By making timely payments on a business loan, you can effectively build up your credit.
You need to expand If business is going great and youre finding that your current situation is not enough to accommodate further growth, it might be time to expand your current space or move to a new one.
You need to hire new staff Along with a growth in business often comes the need to add more staff to your roster. As with anything else in your business, this requires money, which you can get from a business loan.
You need new equipment Whether you need to accommodate growth in business, are just starting out, or simply need to replace obsolete equipment that you already have, a business loan can help you finance such expensive purchases.
Which Type Of Financing Should I Take Out
Business owners can look for small business loans with shorter or longer terms based on their financial needs. The best one for you depends on a few factors. You should consider how youll use the money, how much you need, and how much youll pay in interest with each option.
If youre not sure what kind of financing option you want, consider talking to a financial expert about your situation. Theyll be able to talk you through your choices, helping you find the best small business loans for you and your business.
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For Example You Can Use A Loan To Finance:
- commercial vehicles
- computer or telecommunications equipment and software
- production equipment
Interest rates are determined by your financial institution and may be variable or fixed.
- Variable: The maximum chargeable is the lender’s prime lending rate plus 3%.
- Fixed: The maximum chargeable is the lender’s single family residential mortgage rate for the term of the loan plus 3%.
A registration fee of 2% of the total amount loaned under the program must also be paid by the borrower to the lender. It can be financed as part of the loan.
What Are The Startup Business Loan Eligibility Requirements
Like any other type of loan, a startup business loan has certain requirements that youll need to meet in order to qualify. That said, the requirements may vary depending on your credit health and the lender:
- Good credit score. Conventional lenders like to see borrowers with a credit score of at least 650 before considering granting a loan. Some lender may even check your business credit score.
- A sound business plan. Your lender will want to see that youve put in some effort to come up with an in-depth business plan that outlines what your experience is in the industry, where you plan to take your business once you start it, and how much money you need to cover all relevant expenses.
- No delinquencies or bankruptcies in the recent past. Your credit report will be pulled when you apply for a startup business loan. And in addition to your credit score, your lender will be able to see if youve had any recent delinquencies or bankruptcies. If so, this could hamper your ability to secure a loan.
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Decide What Type Of Loan You Need To Fund Your Business
- SBA loans or traditional term loans. These often have high borrowing maximums SBA loans can reach $5.5 million, for example. Many lenders also offer specific products to fit a growing company’s needs, such as loans for equipment or vehicle purchases.
- Startup financing, such as business credit cards and personal loans. These lenders require cash flow to support repayment of the loan, so companies in their first year typically can’t get business loans. Instead, youll have to rely on other financing.
- A business line of credit. This could make sense if you want to manage day-to-day expenses. This flexible kind of funding lets you tap into financing as needed to cover expenses such as payroll or unexpected repairs, offering a useful safety net.