Finance 101 - 10.10.2016

4 Reasons You Should Never Take a Small Business Loan Unless You Know the APR

You'd never buy a car without knowing the cost, so why would you take a small business loan without knowing its APR, the true cost of that loan? But the truth is, most business owners don't know the APR of their small business loan.

There's a reason for that: the worst offenders do everything they can to hide the true APR. So you should fight back by demanding to know your APR.

Knowing Your APR Will Help You Steer Clear of Sharks

Lots of providers try to hide the true APR because they don't want you to know they're charging you 50%+ APR on your small business loan. Here's a simple rule: if someone won't tell you your APR, you should probably steer clear of them. (They probably don't have your best interest at heart).

Knowing Your APR Will Help You Compare Options

Sometimes, you need a short-term, high-APR loan (typically emergencies). Even then, you shouldn't just sign up with the first person who robo dials you.

You should shop around. There's a wide range of  providers. Some short-term and cash advance companies charge comparatively low APRs averaging around 45%, while others charge APRs well over 100%. If you don't know our APR, you can't shop around, and if you don't shop around, you're leaving money on the table.

Knowing Your APR Lets You Calculate the ROI on Your Loan

Remember: a small business loan is only a good investment if you expect to earn more as a result of taking the loan than you would without it.

But if you don't know the APR, you can't calculate the cost of the loan. Lower APR loans are easier to manage and can be effective growth tools. High APR loans are likely to destroy your business because you can't grow fast enough to keep up.

Knowing Your APR Lets You Avoid Annoying Calls

As a general rule, loans with an APR above 30% are an invitation for annoying phone calls. Other sharks will see the UCC-1 filings and trigger notices from credit bureaus and move towards your business like chum in the water.

You're going to get bombarded with phone calls from call centers, robo-calls, and other annoying tactics. For the most part, these are all sharks trying to "stack" you with more high APR loans. They know you did it once, so you're more likely to do it again.

Pro-tip: Calculate Your APR

Before you click "accept" on your next loan, plug your figures into Able's True Rate APR Calculator, and empower yourself with accurate knowledge of your bottom line.

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