Small businesses are no longer depending on the banks for business loans. Banks are egregious for rejecting small business loan requests or drowning business owners in arduous paperwork. Then along came alternative online lenders, offering small businesses a quick and easy way to get business funding. Online lenders normally offer flexible terms, unsecured loans, easy application and quick approvals. They are becoming more and more popular in the US.
With a large number of online lenders now available, it may be hard to pick the right lender and even just to know who to trust. Business lending marketplaces provide a valuable service, filtering out the top lenders and matching them with your business profile and requirements.
These are the most important criteria that go into picking the right business lender:
Check out Lender’s BBB Rating
Look into the lender, and find out if they’ve got any awards that they can claim. The Better Business Bureau (BBB) offers ratings on various companies, which include financing firms. If you observe “A+” or just simple “A” rating, then you know that you’re dealing with a good reputable lender. Lenders with less than that rating should be considered with caution. Catch on if the lender is affiliated with another financing group related to your requirements, and figure out if they’re known nationally by any awards or journals.
How Flexible Your Lender Is?
You already know that banks aren’t exactly the most flexible entity in terms of loans. They normally count on customers to have solid credit, lots of collateral, and a lengthy business history. They may not necessarily finance super-expensive equipment. Preferably, the lender you work with should offer some level of flexibility to make the lending process as simple as possible.
Do Background Check on Lender
Communicate with your business friends who may probably have used some alternative lenders for their business loan requirements. Do an online search of authentic reviews regarding different lenders to get a few comments. Since everyone has a different situation, you’ll most likely get a variety of views.
Compare Rates and Terms of Each Lenders
Don’t simply look at one lender. Rather, discover a couple of them and make some solid evaluations. What is their average interest rate? What type of funding programs do they offer? How long are their term loans?
Prefer Lenders That Have Good Repute
One of the most important aspects of a lender – as well as any other form of company– is the level of customer service they provide to their customers. Preferably, they have to make themselves available through a different channels. They should have workforce who’re highly knowledgeable, pleasant, well-mannered, and professional. Funding a business can be a distressing process, so you need to make certain that the lender is polite and helpful.
Understand the Types of Loans
Preferably, the lender you decide to work with should have a range of business financing programs that they offer to their customers. Every business is unique, and therefore their funding requirements are different.
Business Cash Advance
A business cash advance can provide you with the cash you need to cover a variety of business expenses. After getting the cash advance, the lender will take a certain amount of your daily credit card sales as the repayment of advance. Since the amount you pay is reflecting how you make in every day credit card sales, your payments will vary. In this settings, you’ll pay more when you earn more and pay lower when earn less.
A major issue that most of the small businesses experience is the delay between invoicing customers and suppliers, and in fact receiving payment. During these gaps in payments, your working capital can suffer. With invoice factoring, the lender will buy your invoices and provide you up to 80% of the funds. The rest of the amount is kept in reserve, which the lender will use for their fees. As soon as the invoices are paid, you can get the remaining 20% of the funds.
Short-term loans are similar to traditional loans that will provide you cash to use for your business objectives. Then you promise to repay the loan, along with added interest rates. There is often a fixed repayment term, in addition to fixed regular payments that are generally made daily as opposed to monthly.
Line of Credit
Business lines of credit work similar to your credit card. You are given access to a selected amount of cash that you can withdraw any time you want. You can use the cash for your business, and you are only charged interest on the amount you owe. As you put that cash back into your line of credit, you can use it on a revolving basis.
Instead of affecting your cash flow to buy your equipment, you can finance it instead and leave your working capital alone. With equipment financing, you’re given a positive amount of cash to purchase equipment. The equipment loan is then paid back, along with lender’s fees, until the complete loan amount is paid back. Once you’ve paid all the borrowed amount, you can take hold of that equipment.