If your small business is slowly growing and would benefit from an extra infusion of cash, a online business loan is probably what you require. Business loans can be used for inventory, growth, equipment and certainly anything else your small business needs.
Recently we have seen a lot of new online lenders enter the race, which are giving business owners increasingly more financing options in addition to traditional bank loans and business lines of credit. These new alternative lenders provide quick funding at competitive rates.
The Rise of Online Lending
There have to be no surprise that with the emerging online banking, the online lending would be close to comply with. Over the years, banks started to accept loan applications online and in the end started to offer full-service business lending through the internet.
There are some situations where going online for an online business loan makes more sense rather than going to a bank or credit union. Here we are going to highlight some of the reasons below:
Need Funds Quickly
Online lenders are known for their quick funding, with some online lenders getting your business funded in just 24 hours. On the other hand, banks can take weeks or even months to approve your loan request and transfer funds to your business’ bank account.
Average or Below Average Credit Score
Traditional and online lenders will compare your personal credit score at some point of the loan application process. If you have a personal credit rating under 680, you’ll have a tougher time getting approved at a traditional lender. In this situation, it’s worth thinking about an online loan as some lenders haven’t any credit criteria or only require a minimum of 500 credit score from borrowers.
No or Bad Business Credit
Many online lenders don’t have any set requirements regarding your business credit rating. Some banks do not have standards either, however increasingly more do – mainly after the SBA started out requiring a certain FICO score for some of its loan programs. Therefore if your business doesn’t have a credit score or has a less than stellar credit, you would possibly need to consider online business loan.
Not Yet Profitable or Has Low Annual Revenue
Even most online lenders have annual revenue requirements, these range from $25,000 up to $200,000, making online lending accessible for a lot of businesses. Specifically, we advise considering an online business loan if your business has less than $200,000 in annual revenue.
Business is Not Yet Two Years Old
Getting a business loan for a new business is quite difficult, no matter which lender you approach. However, a few online lenders have more lenient time in business requirements, lending to businesses as young as three months old. In particular, invoice factoring firms will work with businesses as young as 3-9 months.
You Need Less Than $500,000
It costs banks roughly the same to underwrite a $100,000 loan as a $10 million loan, therefore most banks won’t look at application for smaller loan amounts. For small business owners, this may be very frustrating. Fortunately, most of the online lenders are pleased to fill this funding gap by offering loans as little as $5,000.