If you are looking for funding for your business, it can be overwhelming given the large number of options available. Banks normally provide the best APRs, the large loan amounts and the longest terms; however loans from banks are hard to qualify for and can take so much time to fund. In this situation, you may need to consider an alternative or online lender. Here are some situations where you might consider an online lender over a bank for your small business loan need.
Need Quick Cash
Even as banks usually provide most competitive terms, they can take weeks to even months in some cases to approve and fund the small business loan offers. If you need quick cash, you may need to consider an online lender who can offer funding to your business in just couple of minutes of loan approval.
Have Poor To Fair Credit Score
In case you don’t have an excellent credit rating, your possibilities of getting cash from a bank can be low. A small number of online lenders don’t require a minimum credit score, and will alternatively examine a business based totally on its financial statistics. If you’re limited by your credit rating, then an online lender can be your best option for getting funding.
Need Smaller Amount
Banks are less likely to approve loan amounts normally under $1 million, since the cost of loan underwriting is the same in spite of the loan amount. For that reason it makes sense for them to only approve large amounts of loan; however this can be exasperating for small business owners. Fortunately, online lenders have stepped in with many small business financing programs ranging from $5,000 to $500,000 or sometimes even greater than that.
Has Low Annual Revenue Or Not Yet Profitable
To acquire a loan from banking institution, your business commonly needs to have certain minimum annual revenue and should confirm profitability for the last 2-3 years. In case your small business doesn’t meet these conditions, you may not acquire a loan from a bank. But, most online lenders have more permissive requirements as compared to banks, normally requiring lower annual revenue and no profitability record when getting small business loan.
Business Is Less Than 2 Years Old
If you have a new business, it may be difficult to get funding, even from online lenders. Banks generally want to look at least two years of business history and some online lenders require the same. But, there are a few online lenders that require a year or less in business to meet the criteria for their loan programs.
Need A Solution That Banks Don’t Have
A bank lends to business through a term loan or a line of credit. Other than these funding solutions, online lenders provide financing solutions including merchant cash advances, invoice factoring that allow small businesses to use their unpaid invoices or credit card receivables to get funding for business. If you’re looking for some different type of funding solution besides these, then an online lender is more appropriate for your business.
Despite the fact that the alternative and online lenders have high annual percentage rates and shorter terms as compared to banks, they fulfill unique financial requirements of small businesses. If you locate your small business in one of the above-mentioned situations, start considering getting funding from online lenders.