Are you planning to finance your business with a loan? Of all the different business financing vehicles, loans are one of the most popular. Research shows that nearly half of all small businesses have applied for a loan within the last year. Whether it’s a short-term or long-term business loan, though, you may incur fees. Below is a breakdown of some of the most common business loans and how they work.
A Breakdown of Common Business Loan Fees
All lenders charge interest on their business loans. It’s represented as an annual percentage rate (APR). Depending on the specific type of business loan, the interest may be fixed or variable, the latter of which can change during the term of the loan.
Some lenders charge an application fee. As the name suggests, it’s a fee for processing a business’s application for a loan. If a lender receives a lot of applications, it may charge an application fee to alleviate the burden of processing them. Application fees can range from $50 to $200. Fortunately, not all lenders charge an application fee. You can find both banks and alternative lenders that don’t charge an application fee when applying for a business loan.
Some lenders charge an underwriting fee. Underwriting fees typically consist of a one-time charge. Lenders use them to cover costs associated with reviewing and processing business loans.
Don’t underestimate the importance of making timely payments. If you fail to make a payment by the lender’s due date, you’ll probably incur a fee. Known as a late payment fee, it may consist of a flat amount or a percentage of the outstanding balance. Most late payment fees involve a flat amount, such as $10 or $30. Failure to make a payment by the due date will result in a late payment fee. Other lenders may charge a percentage of the outstanding balance as a late fee.
You may incur closing costs when obtaining a business loan. The term “closing costs” doesn’t refer to any single fee. Rather, it encompasses all loan-related fees charged by the lender. Closing costs may include the application fee, underwriting fee and the application fee. Nonetheless, if you’re going to apply for a business loan, you should check to see whether the lender charges closing costs, and if so, how much you’ll have to pay.
This article was brought to you by Intrepid Private Capital Group, a Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.