Vermont is a hub for small business creation as there are many grants and rewards given to those who wish to become self-employed. There is an estimated 75,000 small businesses operating throughout the state of Vermont, with most of these establishments running on their own without the help of employees or staff. The large increase in small businesses in Vermont has warranted many to seek help from a business loan offered by their local bank. One in every two companies will require a loan at some point in their business’s lifetime, so it’s important to find a good rate from a reputable lender.
When to Take Out a Loan
The best time to take out a business loan is when you need a large lump sum of cash to expand your company or keep it afloat. For businesses looking to relocate, a loan is advantageous in that it provides you the money needed to rent a new property or buy land outright. Some owners use their loans to save their companies from failure and collapse. This particular strategy may not be the most solid, as it is easy for the loan money to not be enough to save your business, but it can help to prevent a company from going under.
How to Plan for Loan Money
Once you’ve decided that a loan is right for you, it’s crucial to plan for the money you’ll be receiving. Before applying, have a clear idea of how much cash you’re going to need to fill your demands. Know where every dollar of that loan will be going to make the best use of it. Too many business owners take out loans without a solid plan and then wind up spending the money on frivolous expenditures that do nothing for the overall success of their company. The last thing you want to happen is that you obtain a loan and wind up owing too much in return, which puts your company in a rather precarious situation.
Finding a Good Rate
Vermont business loan rates vary from 5.5 percent to 8.5 percent. The rate you obtain is dependent on your risk factors and credit score. If your company is considered risky or niche in nature, the lender may offer you a loan at a higher rate. Stable and fully-established businesses get the best rates, so it might be worth it for you to wait until your company is a year or two older than it is before applying as you’ll save more money long-term. Comparison shopping is vital when looking for the best loan because no two lenders are alike in what they offer.
Be wary of banks offering new sign-on bonuses that are only good for the first year or two of the loan contract. These can be tempting at first because interest rates may be kept significantly lower than normal despite an owner having bad credit, but the rate will skyrocket once this introductory period has passed. Most businesses seek loans in the springtime and this is typically when banks offer their best rates, so it might be a good idea to wait until the winter ends to apply for money.
The Application Process
Business loans are different than personal loans because your company’s assets and capital are taken into consideration just as much as the owner’s FICO score. If your company doesn’t have much potential or is on the brink of failure, you could be denied your much-needed cash. The application process starts with a thorough credit history check by the bank on anyone who will be signing the loan contract.
Once this has passed to the bank’s standards, you will need to present viable information pertaining to your company. This includes expenditures, bills, investments, income, receipts and debts. The bank wants to know everything about your company so that it can weigh your risk factor with eligibility. Banks can be pretty picky when it comes to business loans because so much is at stake and more money is often lent out to borrowers. In fact, the average business loan in Vermont is for $50,000 as opposed to a typical personal loan that is given out for $10,000.
Repayment and Refinancing
You can choose the repayment agreement with your lender to find what suits your financial needs. Business owners typically find a 10-year agreement to be within their best interests as it gives them adequate time to have everything paid back in full. If you begin to find loan payments to be a burden, you’re able to refinance the amount into a longer term contract.
Banks in Vermont Offering Business Loans
- Union Bank
- Wells River Savings Bank
- Northfield Savings Bank
- First National Bank of Orwell
- Bank of Bennington