Loan Agreement in Georgia: Common Mistakes to Avoid When Making Your Business Loan Application
A loan agreement is a legally binding agreement between lenders and borrowers. This agreement stipulates the terms of the contract, conditions for default, and every other aspect of a loan extended to a borrower, whether by a credit lending institution or your friend. The loan agreement is also called a promissory note, a loan contract, or a business loan agreement. The agreement comes several important clauses that ensure that lenders and borrowers get to enjoy the best deals on the loans they are offering or applying for. To ensure that you have everything running in the right direction, you might want to make sure that the loan agreement in Georgia has the fairest terms. You’d have to download a free Georgia loan agreement form. The loan agreement form is essentially a sample document that comes with all the important clauses are incorporated in the contract.
But even with a sample loan contract that ensures you have all the details you need for an airtight loan agreement, there are mistakes that you could avoid to ensure that your loan application is not complete, but also airtight with all the important details you need for fair terms and reasonable terms.
That said, here are some of the mistakes you should be aware of and avoid when making a loan application.
Lacking an updated financial record
Before you apply for a business loan, you need to make sure that you spend as much time on your financials. Financial records and statements are crucial because lenders need the information about the operations of your business to ascertain your financial viability, how much money they can extend to you, and the type and value of collateral they could take on you. Without detailed financials, lenders might either reject your loan, and even if they approve the application, the loan will be expensive. Details like your balance sheets or cash flow statements increase the chances of business approvals, and they also allow you to make reasonable repayment rates.
Failure to Read and Understand the Terms of Your Loan/ Fine Print Before Signing the Agreement
Do you read the terms and conditions for the contracts you sign up for? One of the biggest reasons why you may end up paying for a loan at a higher than necessary rates is that you fail to go through the draft fine print.
So, why is it that big of a deal to go through the fine print? Well, for starters, the fine print stipulates all the important aspects of the loan you’ve applied for, including the repayment terms (regular payments or lump sum payment), the interest rate charged, the value of the loan, collateral, defaulting, etc.
Speaking of the interest rates, it’s important to know that the state of Georgia has set the maximum interest rate limit at 7%, and any interest rate above 7% has to be specified in writing. However, there aren’t any limits on the interest rate charged for loans ranging from $3,000 to $250,000. For loan limits not exceeding $3,000, the maximum interest rate acceptable is 16%. Usury laws exist in the state, though, and in case a lender charges an unlawful interest rate, then they’d have to forfeit the entire value of the interest charged of face a criminal penalty. The state has also specified limits on interest rates for legal judgments at 3% - prime rate is determined by the Federal Reserve System.
Lack of Clarity on the Use of Funds
You hurt your chances at the best loan terms when the purpose of you are applying for is unclear or bogus. This also happens when you don’t have a solid business plan. To ensure that the small business loan you apply for, you need to be very specific about the purpose of the loan you are applying for. And by being specific, you need to elaborate on all the small details about how you will use the money you are applying for.
Ignoring Your Credit Score
If you are planning to apply for a loan, one of the first things that you have to remember is that lenders always check credit scores. If you have a bad credit score, your loan application might be approved, but that’s often at a higher interest rate compared to the rate that would otherwise be charged if you had a good or an excellent credit score.
Late Application for loans
If you are going to make a loan application, you need to do that in advance because rushing through it and making that loan application when you are desperate for funds means that you easily fall for lenders’ traps and the most expensive offers. To enjoy loans at favorable interest rates and the best terms on your application, you need to keep proper books, be aware of your options, and research for great lenders with the best terms.
Now that you know about all the pitfalls you should avoid, a state-specific loan contract sample might be exactly what you need. If you are planning to apply for a loan in Macon, Augusta, Atlanta, Savannah, Marietta, Athens, or any other city in Georgia, our loan agreement form would get you started on the right foot. Get yours today.