Most small business owners need quick business financing to run a business successfully. Whether you are a startup business or an established one, money is required for equipments, operations, fixtures, new location space etc. Usually the loan amount required is more than the personal credit cards will allow. In this situation, business owners have to decide whether to apply for a traditional bank loan or an SBA loan, or to search for alternative financing options.
With the aim to assist small business owners and to make their decision easier, we have laid some important pointers to decide between the traditional bank lending and alternative business financing option.
Business Lending Requisites
Online Financing – Online business financing doesn’t require small businesses to have well established credit history. Online business financing is mostly short-term and most of the risk is on the lender, and rates of interest are usually higher than traditional bank loans.
Bank Lending – In case of bank lending, the bank officer’s require strong historical financial records and anticipated cash flow with a good credit score to approve the loan application. Banks lending also calls for collateral as security to reduce the risk while lending money to businesses.
The Interest Rate & Repayment Terms
Online Financing – Most of online business financing options are short term so higher interest rate is tied to them and so is are the longer repayment terms; but there are funding options like business cash advance or merchant cash advance that are percentage of your future credit card sales with repayment term of five to ten years. This financing option allows small businesses to avail quick business funding with flexible repayment terms.
Bank Lending – Although online business financing is short-term, traditional bank lending can be availed with longer repayment terms. This generally relieves the financial stress on small business owner. Bit, this longer repayment terms and lower interest rates add to more money to be paid in the end.
The Loan Application
Online Financing – Online business financing options frequently have fast turnaround times. Once a business fills a loan application, approval granted in 1 hour and funding made within 48 hours of approval. Thus, it makes it the most appropriate funding option especially for startup businesses that need immediate funds to support operations.
Bank Lending – Traditional bank lending is a secured process, but the process itself is complicated and lengthy – calling for detailed bank statements, ownership evidence, a strategic business plan, future sales forecast, and many other data requirements. After the application is made, there is a loan approval and funds disbursement time span which takes weeks and even months to get approved.
Small Business Expert Can Help
Whether you are a startup or an established business that is searching for quick funding to support business operations, you can get funding from both traditional banking and online financing options. In order to make your decision easier, it’s better to talk to an financial expert at Merchant Advisors to find out what financing options are best suited for your small business.