Before you borrow money for your Business, you need to ensure you are looking at the Total cost of credit (TCC) and not the Annual Percentage Rate (APR) otherwise your business loan may end up costing you more.
There are a huge reasons for needing a business loan just some may be;
- importing more stock to sell
- putting on a staff member
- advertising to grow your business
- unpaid invoices
- cash flow, and the list goes on
Basically, most businesses need finance at some point to either continue to do business or to grow their business. The key to a business loan is to ensure you are looking at the TCC to make sure your business will benefit from the funds, and not break even or worse, go backwards. So what is TCC and how does it differ to APR?
Total cost of credit is the total you will pay to have access to the credit. This amount includes fees, charges (ongoing establishment or both) as well as the total interest over the term of the loan. Annual percentage rate, however is purely just the interest rate you are paying annualised over the year.
As you can see, if you rely on the APR alone you may (depending on the lender and the loan) you risk comparing loans incorrectly and you may end up paying more than you realise.
Once you know the TCC you can input it into your Cash flow projections to ensure the loan will help your business to continue to prosper.
There are as many different Business loans as their are reasons to borrow, so if you have a need for some finance, or would like to talk about how I can help you take your business to the next level please feel free to call me on 0412862811 or book a time with me here.