A small business loan is an common option for individuals or a group of individuals trying to establish a business. This is also an option for many small businesses who wants to stay afloat or to be more competitive. It’s an amount that can push the business into the right direction.

But immediately jumping into small business loan might not be a good idea for some businesses. There are some factors and ideas that makes a small business loan a bad idea. Before you consider taking out a loan for your business, here are some tips:

1. Company Reputation – know the background of the lending company who wants to work with your business. There are companies who actually have a bad reputation even though their business is legitimate. Check their information online or seek tips from other small businesses regarding their business practices.

2. Go local before online – online companies that offer small business loans might offer the best interest rate but their legitimacy should always be questioned. Check first with your local lending companies about the rates and services they offer before resorting to online small business loans.

3. Reading Fine print – the biggest problem of small business owner when it comes to lending is when they fail to read the fine print. Everything that should be known about the loan are on the fine print and ignoring this document could mean additional payment.

4. Hidden Charges – many loans and financial transactions come with hidden charges and small business loans are no exception. Before agreeing to their offer, know exactly how much you should pay every month and know the actual itemization of your payment. Lending companies are obliged to tell you everything as long as you ask them.

5. Spending Plan – if your answer to the question "why you need a loan" is "I just need extra cash for my business", then you should never seek any small business loan. Itemize how you will spend your loan so that you’ll have a concrete idea on how the loan can help your company.

6. Loan Services – there are companies who actually pose as lending companies but they will force you to use their merchant services for credit cards purchases. Avoid this transaction since you’ll be tied up to the lending company more than simple loan.

7. Explore Other Options – many lending companies offer more than one package for small businesses. Select a business loan that fits your need without the high interest rate.

8. Small Interest Rate Offer – there are lending companies who entice small businesses with their small interest rate. Their interest rate may be highly competitive but the additional fees that you may need to pay them for the loan could increase your loan exponentially.

9. Secured Loan Transactions – if you have a choice, always go for unsecured loan transactions. The secured loan can easily place your assets in the lender’s hands especially if you don’t have a concrete plan on how to spend the loan that will improve your business. If your business fails, you’ll also lose your property.

10. Additional Assistance – A good lending company is not just a company that offers a good rate. Choose a lending company that will help you prosper in your industry. Many lending companies are now offering consultations as part of the small business loans so that their lenders should improve in the industry and pay the lending companies faster.