What Constitutes a ‘Good Rate’?

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Know What Constitutes a ‘Good Rate’

Financing can seem overwhelming even to the best small business owners, but good lenders are here to help.

A good lender knows that while you’re the business expert, they’re the financing experts, and it’s their responsibility to help you understand what you are getting when you sign your next financing agreement.

That’s why we want to help you dispel some of the myths about ‘rates’.


Comparing apples to apples

In a society where we are rate-driven and always looking for the “best deal,” we expect all financing terms to be alike when in actuality financing rates can be calculated many different ways and are not always comparable. As consumers, we are bombarded with advertising promoting 0% APR and mortgage rates in the 4’s. In reality, those same rates we are accustomed to seeing don’t translate into the financing rate for most business loans, leases, or financing. It can be hard to shed the pre-conceived notion of what constitutes a ‘good rate’.

Make certain when comparing quotes from different companies that you’re comparing apples to apples. There are key terms (such as ‘term of loan’) that can be confusing for those outside of the financing industry and they will appear differently according to different lender’s contracts. It is also vital to look at the type of agreement being offered. There are many ways to obtain financing for your business purchases, from a capital or fair market lease to an equipment finance agreement. Make sure that the figures you’re comparing match up by asking your lenders for thorough definitions.


Factors in determining rate

There are several factors that go into determining your rates including credit history, length of time in business, and other financial figures. There is no single button to press that will churn out cut-and-dry rates for you, but you can prepare yourself before settling on a lender by knowing your business’ financial history.

A good way to determine the value of what you’re getting is to look at the monthly payment. Are you getting a monthly payment and term of loan that works for YOU and YOUR business? The most important factor is that you can afford to pay your bill on time, every time.