If you’re an entrepreneur on the search for funding for your small business, you’re probably aware that traditional banks aren’t your only option anymore. Today, there are more online business loans available for your company than ever. In fact, you might be feeling overwhelmed by all your options, and unsure of how you’ll ever choose the best one for you.
Fundera is the ultimate guide to finding small business loans online. The company made it possible for you to search for small business loans as simple as possible. Online business loans are a necessary alternative to banks.
Traditional banks have always had tight credit for small businesses, but after the 2008 recession, they tightened access even more. It was hard to get a bank loan before, but now it’s nearly impossible. In fact, only about 20% of small businesses can qualify for bank loans today.
That’s where online small business loans come in. Since 2007, online lenders have joined the lending marketplace to open up credit for small businesses that don’t qualify for a bank loan.
So when you Google “online business loans,” an array of options will show up.
With more online small business loans available than ever, it’s now necessary to learn what these options have in store for your business.
If you’ve already gone through an application for a traditional bank loan, you know that it isn’t a speedy process. If you apply to an online lender instead, you’ll find that the process is much, much faster.
Since they’re not banking institutions, alternative lenders providing online business loans don’t have to work with as much government regulation during their loan approval process.
You also won’t have to provide as much paperwork for your application. You’ll spend less time gathering documents, and the lender will spend less time processing them.
And finally, the term “online small business loan” says it all: the technology aspect of these small business loans speeds up the application processing time significantly.
Traditional banks offer the business loans you’re probably most familiar with: term loans, lines of credit, and credit cards.
If you’re pursuing online business loans, you’re going to have some more flexibility with the loan product you choose—you won’t be limited to the most conventional options out there. There are many different online business loans to serve many different purposes. (We’ll get into those soon).
Plus, online lenders will fund a variety of loan sizes depending on the needs of your small business. While a traditional bank won’t consider making loans for less than $250,000, online lenders can easily make loans between $5,000 and $250,000.
Small business owners will have an easier time securing an online business loan, but they’ll do so at a cost—online business loans tend to have higher rates and fees than traditional bank loans do.
Online small business loans are more expensive in part because they’re so accessible.
Alternative lenders widen small business’ access to credit, but to do so, they take on riskier borrowers. Unfortunately, if you have a less-than-ideal credit score or you haven’t been in business for long, funding your small business is a risky investment.
To minimize their losses if you default on your small business loan, online lenders charge high interest rates and fees.
Not all online business loans will be expensive—you might luck out with a 6 to 15% SBA loan if you have a great credit score. On the other end of the spectrum, you’ll find APRs in the higher double digits with loan products like merchant cash advances.
There are a whole bunch of reasons why you might pursue online small business loans for your company: you don’t qualify for a bank loan, you have a very specific financing need, or you need the small business loan quickly.
Luckily, there are a lot of small business loans that can fit your specific needs.
But before you get too far into your business loan search, you’ll want to have these things in mind.
Your eligibility for a bank loan might depend more on your business credit score. But when you’re pursuing online business loans outside of a bank, your personal credit score will matter a lot.
This might come as a surprise for small business owners. Online lenders are funding your small business, so why does it have to get personal?
Good question. When deciding whether or not to finance your small business, lenders won’t have a lot to go off of—your business is small, so you probably haven’t been in business long enough to prove that both you and your business can successfully take on debt. Online lenders will rely on your personal credit score as an indication of how likely you are to pay your loan back in full and on time. If you’re trustworthy with your personal finances, chances are you’ll be trustworthy with your business finances, too.
All in all, if you have a strong personal credit score, you’ll have more affordable options available to you. It’s worthwhile to see where your credit score stands before you get too involved in the search for a small business loan. If you don’t qualify for as many loans as you’d like, you can work to improve your credit score to open up your options in the future.
If you’re considering using an online business loan to meet your funding needs, you’ve already taken a great first step. Next, you’ll need to consider the many small business loans that are available online.
Not every business loan online will meet your needs, or be right for your specific business’s qualifications.
However, it’s important to be fully aware of all the online business loans on the market, so you can be sure you’re getting the right type of loan for your business.
When it comes to online small business loans, there are a lot of options you can pursue for your company. Sorting through them all can be an exhausting and confusing task.
Fundera was created to make the process of finding an online small business loan as simple as possible. With our free online marketplace, you can easily compare your options, and figure out which small business loan is right for you. Are you ready to grow your business?
Start here, https://www.fundera.com/apply-for-a-loan#/questionnaire