Money Smarts Blog
Before You Borrow: 5 Questions Every Business Owner Should Ask
Aug 15, 2025 || By Josh Peterson, Vice President of Commercial Lending
Thinking about a business loan to fuel your growth? Let’s make sure it’s the right fit before you sign on the dotted line.
Getting extra capital can be a game-changer. But taking on a loan you don’t fully understand, or can’t comfortably repay, could cost you more than just money. Here’s a quick rundown of key questions you should have answers to before moving forward:
1. What’s my interest rate: fixed or variable?
Your interest rate is the heart of your loan cost. A fixed rate stays steady throughout the loan term, so you know exactly what to expect each month. A variable rate can fluctuate, sometimes making payments go up or down. If your loan has a variable rate, ask what triggers those changes so you’re not caught off guard.
2. What about term and amortization?
Think of term as the countdown to when your loan is due. Amortization is the schedule that breaks down how your payments chip away at both principal and interest over time.
If your term matches your amortization, you’ll pay off the loan at maturity – nice and tidy. But if your term is shorter, be prepared for a balloon payment (a lump sum due at the end). Surprise balloon payments? Nobody wants that.
3. Is there a pre-payment penalty?
Planning to pay off your loan early? Awesome! But some lenders charge a fee for pre-paying. Usually, penalties apply only if you refinance elsewhere, but it’s best to double-check so you’re not hit with unexpected costs.
4. What are the closing costs?
Closing costs cover the fees involved in getting your loan finalized. They can vary widely depending on the loan type and lender, but your loan officer should be able to give you a good estimate upfront – no surprises here!
5. What documentation will I need?
Loans require paperwork, sometimes a lot of it. Be ready to provide tax returns, financial statements, and other documentation. It’s not the most fun part, but it’s crucial to ensure you get the right loan for your business.
Taking out a loan is a big step, but it can be a powerful tool to help your business grow. The key? Feeling confident that you understand your loan and can comfortably manage the payments. Every business decision involves risk, so make sure it’s one that pays off.
Curious about how a loan could help your business take off? Let’s chat!
