Do you usually zone out when your financial advisor is talking about the fees, interest rates, and factor fees involved in applying for a small business loan and ask your financial advisor to repeat all those terms and in plain English? No more, we have got you covered. Whenever you are applying for a small business loan, you are entitled to come across various types of fees. It is always good to be informed, so before you dive in this industry and apply for a small business loan, you must know the reason why the potential lender is charging you for a specific fee and what will happen you fail to pay the specific fee? Make an informed decision and have a look at the following fees.
- Application Fee
Whenever you are applying for a small business loan, you are obligated to submit the application fee. Lenders charge this fee because it takes time and consideration to review multiple application. On the other note, engaging with lenders that charge for application fees before even approving the loan application is not a nice idea. Merchant Advisors prioritizes the comfort and convenience of its clients, hence this lending company does not ask for an application fee.
- Origination Fee
Lenders ask for an origination fee to set the loan approval process in motion. The origination fee is also called a processing fee. Most lender charge 1% to 6% for small businesses. Some lenders also charge flat origination fee up to $350.
In addition to this, the origination fee is included in the loan that is lent by the lender to the borrower. So looking at this technology, the origination fee is already in the cash offered to you.
- Service Fee
Every business loan has a different loan term or repayment term. The repayment term for a long-term loan goes up to 35 years. During this period, the lender has to keep the borrower up to date by sharing the billing, customer service, and other important documents. It is known that none of these tasks can happen for free, so the lenders charge for the service fee to cover the cost of the ongoing notifications.
Service fee is charged in two ways:
- As per the daily percentage of the payment.
- Depending on the total loan amount (if the lender is charging in this manner, then only once the borrower has to pay the service fee.
- Prepayment Fee
Although most of the lenders encourage borrowers to clear off the debt as soon as possible, before taking this heroic action, a borrower must check in with the potential lender because some of the lenders charge the prepayment fee.
There is a clause in the contract that mentions the consequences a borrower has to face if he or she pays early. As the borrower is supposed to pay the interest rate with each payment, but clearing off the debt might lead to the loss at the borrower’s end.
- Monthly Administrative Fee
As a borrower, you are not obligated to pay the monthly administrative fee. This fee ranges from $50 to $100. But as you are already paying from the origination fee, then paying a monthly administrative fee does not make sense.
Just like a monthly administrative fee, there is no need to pay for the annual fee. Many alternative lenders ask the borrower to pay the annual fee. Be aware of the baseless fee like this one and get in contact with lenders who offer transparent funding and have no hidden cost.
- Referral Fee
As a borrower, you have the option to apply for the small business loans through lending companies, and you have to pay the referral fee. The whole process of sending your application to the lenders and sharing the final verdict with the borrower. By offering a referral fee, you are getting the best customer service from the lending company.
- Preparation or packaging Fee
Not every lender charge for the preparation or the packaging fee. As you are applying for a small business loan so you must be familiar with the long list of financial documents. If you pay the preparation and packaging fee, then a lender can help you arrange all the financial documents and decipher the credit score report and balance sheet. Paying a packaging fee can ease your labor.
- Other Fees
Other than these fees, wine transfer fee, payment by check fee, non-sufficient funds, and SBA guarantee fee. Before signing any contract make sure you have read every postulate.
Watch out for all the fees attached to small business loans. Merchant Advisors believes in offering small business loans at a lower interest rate and no hidden fees. For more ideas and tips to keep your small business running, you can follow us on Twitter (@Onlinecheck) and Facebook (@Onlinecheck). If you have any question, feel free to call us on our toll-free number at (833) 827-4412, our loyal and keen financial advisor will answer your every question and guide you throughout the way.