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TERMINOLOGY
There are some mistakes that are common when you use a commercial loan for your business needs. In most cases the first offer you receive is not the best one you can get. If you do not thoroughly understand all of the loan terms, you may leave yourself open to complications that require another financing solution to resolve.
Mistake #1: Not Comparison Shopping
If you shop several sources, you can let the lenders that give you an approval try to outbid one another for your business. This can drive down the total cost of your loan, further increasing your profitability.
Mistake #2: Lack of Document Review
If there are contingencies that your lender has built into in the loan structure, make certain you understand the consequences of failing do what they require. For example, you may have agreed with the lender that you will sell some assets in order to make a principal reduction after 60 days.
Mistake #3: No Long Term Solution
If you are using the commercial loan funds as a short term solution to a long term problem, you may end up having to apply for another loan if the problem does not get solved. For example, you are using the funds for payroll, when you should be cutting staff instead.
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