The following is a guest post. Enjoy!
Many small business owners need to borrow money to help their business grow, but they find that getting a traditional bank loan is too difficult. Banks have extensive applications, credit score requirements and often are reluctant to lend to new businesses without several years of an established track record of earnings. Also, many banks have limited the number of loans they make in smaller amounts of $200,000 or less, which is often the amount of money that truly “small” or startup businesses want to borrow.
With these challenges in mind, many small business owners are looking to new options to get small business loans. Fortunately, there are several alternatives now available, known as platform lenders, which offer online loans for small businesses.
If you are considering getting an online loan for your business, here are a few key points to keep in mind:
Do Your Research
Before choosing a lender for your online loan, it’s important to do your homework. Compare a few different lenders and the types of loans they offer; read customer reviews and Google each company that offers online loans to see if they have any complaints or regulatory issues. You should make sure you’re dealing with a legitimate company that has a good track record of solid business ethics. Read news coverage about the various online lenders that you are considering to see how their lending platform works and whether their model of online loans is right for your needs. Different online lenders serve different types of customers and offer different sizes and terms of loans – not every lender is the same and not all of them might be the right fit for your business.
Provide All Necessary Information
Many small business owners get frustrated with the traditional bank loan application process – filling out pages of forms and waiting a long time to get a decision. Many small business owners feel like banks are only interested in their credit score and income history, and are not paying enough attention to the bigger picture of what their business is about and how their business can become more profitable. This is one area where online loans for your business can be a great solution because most platform lenders look at a wider variety of information when deciding whether to issue you a loan. Instead of just looking at your credit score or track record of earnings, platform lenders will often assess your PayPal transactions, your social media following, your current cash flow and other factors that are often more favorable for startups and online businesses. Especially if you run a relatively young business and you do a lot of sales online, online loans might be the right solution for your borrowing needs.
Understand How Your Loan Works
Before you commit to getting an online loan for your business, make sure you understand the fine print of how your loan works – including the terms, repayment deadlines and total fees. Many online loans work like a “line of credit,” also known as a revolving credit account, which gives you a credit limit (similar to a credit card) that you can borrow from as much or as little as you need, and then pay back over time in flexible installments (either all at once or in smaller amounts, as long as you meet your minimum payments). But some online loans might require fixed monthly payments, so be sure that you understand exactly what is expected and can pay off your loan in whatever manner works best for your business.
