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What is the difference between Flat and Reducing Interest Rates?
Rates on loans can be calculated in two ways - as a reducing rate or as a flat rate. With a flat rate, the rate is calculated on the entire principal amount of a loan (the full, original amount borrowed) whereas with a reducing interest rate, interest is charged only on the outstanding amount of the loan on a periodic basis. Flat interest rates are normally lower than the reducing balance rate and therefore considered misleading. When it comes to comparing loans, the best way to compare their true cost is to convert everything into the Reducing Interest Rate equivalent (click here
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What is an early settlement fee?
This relates to the fee applicable if you decide to pay off your loan early. If, for example, you take a business loan for three years but expect to be in a position to pay if off before then, any early settlement fee becomes an important factor in choosing your loan provider.
What is an arrangement fee?
This relates to what the bank will charge you at the beginning of the loan and is clubbed with your principal loan amount. Some banks may offer business loans with no arrangement fee but others may charge a fixed fee or a percentage of your total loan amount.
What documents are required to apply for commercial finance?
This will depend on your chosen provider but the key documents normally requested include:
- Completed Application Form
- Copy of company's valid Trade License
- Company's Last 12 months Bank Statement
- Valid Passport Copy and Residence Visa for the Authorized Signatoree
- Copy of Company's Utility Bills e.g. office telephone or Water & Electricity bill
- Copy of signed Memorandum and Articles of Association of the Company