Read the terms before celebrating the approval

Put offers into one format

A headline rate is only one part of a financing arrangement. Ask each lender for a written description of the principal amount, rate structure, fees, repayment schedule, maturity and the conditions required before funding. Note which items are estimates and which have been committed.

Use the same proposed project and timing when comparing offers. If one quote includes equipment and another assumes separate equipment financing, the apparent difference in payments can mislead. Reconcile the use of funds before judging affordability.

Read the exceptions and triggers

Ask about prepayment, late payments, covenants, collateral, guarantees and circumstances in which the lender may demand repayment. SBA’s Lender Match resource specifically encourages borrowers to ask about rates, fees, qualifying factors and repayment-related conditions. Have an independent adviser examine the actual documents.

Determine what must happen between a preliminary approval and the release of money. A site change, delayed opening or missing third-party approval can affect a transaction. Write down expiration dates and tasks assigned to the borrower.

Test the business and household calendar

Place proposed payments alongside rent, payroll, franchise charges and reserves. Ask what changes if opening takes longer than expected. A lender’s willingness to offer financing does not determine whether the commitment fits your goals or household exposure. Review the full arrangement before accepting obligations.

Put it on paper

• Compare written terms on consistent assumptions.
• Ask about guarantees, covenants and prepayment.
• Distinguish approval conditions from funded capital.

Continue with the franchise research checklist, our FDD guide, and the research directory.