Things to look for in Small Business Loans

Too often small business owners only try to get a small business loan when they have hit a wall and are desperate for cash. When that happens, usually they are so happy to get their hands on some operating capital that they ignore the terms of the loan.

Here's a list of common small business loan terms and things you should consider:

1. Collateral - The loans will often ask for a collateral assignment on all your small business assets and often your personal assets as well. Understand what this means.
   
2. Default - This explains what the rights of the creditor are if you fail to pay.
3. Prepayment - There is often a penalty if you prepay small business loans. I've seen some ridiculously punitive repayment terms. Pay attention.
4. Interest calculations and triggers - there are many loans that have triggers that are easy to trip that raise your interest dramatically. Think about it, if you trigger a high interest rate and are stuck with # 3 above...that's a bad combination.

The best advise is to seek small business loans or lines of credit before you need the money. This way you'll be in a better position to shop around and negotiated reasonable terms from your lender.

If you've had a good experience with small business loans let me know who the lender is so we can help other small business owners.