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Finance & Accounting, Small Business Loans

What You Need to Know About Online Loan Lenders

Online Loan Lenders

Since the financial crisis of 2008, many small businesses have had great difficulty finding the funding they need to get their companies off the ground. Other business owners with thriving companies that are already established still face challenges when looking for capital to help grow and expand their businesses.

That is where online loans come in!

While traditional banks have become more conservative with their business lending as they continue to recover from the recession, alternative lenders like Kabbage have stepped in to open up new opportunities for small businesses who need funds to start and grow their businesses.

Like most things, not all online lenders are created equal. With so many choices available, it can become overwhelming to decide which option is the best for you. Below, we will tell you everything you need to know about online loan lenders so that you can make the decision that’s right for your business.

What are Online Lenders?

Online loan lenders provide alternative options to the traditional bank loan. These lenders provide short-term small business loans or lines of credit for business owners who need funding for a variety of reasons including purchasing inventory, investing in equipment and hiring more staff. Rather than going into a bank and filling out lengthy amounts of paperwork, online lenders offer loan applications completely online to expedite the approval and funding process.

Online lenders are often a great option for businesses who do not qualify for a traditional bank loan because these lenders take into account more than just the business owner’s credit score. By looking at past business history and revenue, these lenders get a better overall picture of the business’ health, allowing them to more accurately determine a borrower’s ability to pay back the loan.

What is the Online Loan Application Process Like?

First, you start by filling out a short application online. During the application process, you will be asked to provide personal and business information as well as connect your business accounts like Square, PayPal, eBay, Intuit QuickBooks or your business checking account. This allows the online lender to get accurate business data in real-time, which can often tell them more about a business owner than they can learn from looking at the credit score.

This automated online process allows for a quick application decision. Most lenders are able to approve your application in a matter of moments if they are able to access your business data instantly. Even if they need additional information, the application decision will typically only take a few days. Once you are approved, you can start withdrawing funds from your line of credit right away.

What are the Benefits of Using Online Loan Lenders?

Many small businesses are unable to obtain a traditional bank loan because they only need a small amount of capital or may not have the desired credit score. Online lenders offer the benefit of having a more holistic approach to application decisions that takes a company’s real-time business data into consideration rather than just the owner’s credit score. They are also more likely to provide smaller funding amounts for small businesses.

In addition to a more inclusive application process, online lenders also offer the following benefits:

  • Applications are online and automated. Rather than filling out multiple pages of loan documents and collecting copies of income statements and tax records, online lenders make the application process easy by allowing business owners to upload this data online. This also makes the application decision process faster, allowing you to get your funds sooner.
  • Businesses get the funds they need faster. It may take weeks for you to hear back about your application decision from a traditional bank and then even more time to receive your funds. Online lenders deposit your funds instantly into your bank or PayPal account so that you can start using your funds right away to grow your business.
  • There is more flexibility in funding options. When you are approved for a traditional bank loan, you are given one lump sum. Many online lenders offer options such as a business line of credit that allows you to take as much money as you need when you need it.

Though the benefits may vary from lender to lender, many online lenders make the application and funding process faster and simple.

Are Online Business Loans Safe?

Some small business owners may have questions about the safety and privacy of online business loans. It is important for you to research your online lender and review their privacy policy to better understand how your data is being used. Reputable lenders like Kabbage comply with certain privacy regulations like TRUSTe and Safe Harbor, which regulate the collection, use and retention of personal information.

Is an Online Loan Right for Me?

Alternative online lenders open up a variety of new possibilities for small business owners who need additional funding. An online loan might be right for you if:

  • You have tried to apply for a traditional bank loan in the past but did not qualify.
  • Your business is rapidly expanding, and you need funds fast.
  • Your credit score is less than stellar, but your business is on the right track.
  • You want more flexible funding options.
  • Your business needs less than $100,000 in funds.

Each business varies and so do their lending needs. Online loan lenders make the application and funding process quick and simple, offering more flexible options for business owners.