Applying for Business Funding Online
Our Guide to Getting Funds Online
The internet allows you to shop for groceries, read the news, check in on your friends and manage your personal finances, all from your mobile devices.. However, while all the tasks on that list are relatively easy, if you’ve never applied for a loan online, you may be wondering what that process involves. Here are five aspects you need to understand before applying for funding online:
Find the right lender.
The online marketplace contains a vast range of loans and lenders. You may apply for installment loans, credit cards, small business lines of credit and many other types of loans from banks, merchant lenders and fintech lenders. Your choice depends on:
- The type of loan you want
- The funding speed you prefer
- Your personal credit score
- Your overall business’s health
- And several other factors
With traditional funding, you can often start the application process online but may have to follow up in person. If the loan is for your business, you need a business plan that includes future earnings projections as well as information on your number of employees, industry trends and your personal credit-worthiness. The whole process can take weeks to complete.
If you opt for a credit card, you can complete the entire process online and receive acceptance or rejection immediately. The creditor uses your personal credit score to determine approval, and if your application is approved, receiving the card can take a week or longer.
Finally, online lenders offer an application process that may not be centered around your credit score. Rather, these companies use data to create a picture of the overall health of your company. The approval process takes seconds, and funding often happens within a day. In most cases, the minimum requirements include being in business for at least a year and meeting a certain revenue threshold.
Compare loan terms.
Once you’ve found a lender or narrowed your options, it’s time to start comparing terms. The cost of a loan is measured in its interest and fees. If the loan charges interest, remember to look closely for fees such as origination fees, early repayment fees or late payment fees. Then, determine how much it is going to cost to borrow the money you need over a year’s period. Finally, compare that amount to the cost of other loans you are considering.
Gather application materials.
Before you open a bunch of tabs and start entering details to apply for a loan online, gather the information you need. If applying with a traditional lender or a credit card company, pull your credit report to check on your score and review it for accuracy. If you need to submit a business plan with the loan application, run it past a consultant to boost your chances of approval.
Conversely, if applying for a loan through an alternative lender, be prepared to share information from your online accounts to create a snapshot of your credit-worthiness, your business’s general health, your cash flow and your business performance. In most cases, you sign into your online accounts such as:
- Intuit QuickBooks
- And more
Determine if you can handle the repayment schedule.
Whether you apply for a single loan or multiple loans at the same time, you don’t have to accept the loan if you don’t want to. First, review the repayment terms closely and be honest with yourself about whether or not you can afford it. Credit cards often require monthly minimum payments that are only a percentage or two of the balance. While this may be affordable, paying only the minimums can lock you into debt for decades. Conversely, installment loans and lines of credit often require more substantial monthly payments, and while these may be harder to pay, the larger payments ensure your business doesn’t stagnate in debt.
Finally, some merchant lenders allow you to repay loans using a percentage of your incoming credit card sales or revenues. This option is appealing to many small business owners as it pairs payments with revenue, but for others, it cuts too harshly into their available working capital. In addition to payment amounts and timing, also consider late fees and other costs when determining whether or not the loan works with your budget.
Accept the loan and start growing.
Once you’ve closely reviewed the options and selected the right one for you, it’s time to accept the loan and start growing. Ideally, whether you work with a lender who requires a business plan or not, you should have a plan for the funds. That keeps you in control and ensures you don’t overspend on a whim.
With online lending, you’re not on your own. Many online lenders offer online chat or phone support while you fill out the loan. Additionally, these lenders have designed their application processes to make them as straightforward as possible. But what happens if you’re worried about your credit score?
Applying for funds with less than stellar credit
Having less than perfect credit is a reality for most Americans. And having bad credit often times can hinder us from reaching our full potential. However, because our economy has recently been climbing back up, having bad credit doesn’t hold as big of a stigma as it used to. Whereas before getting any type of loan with bad credit was basically impossible, now bad creditors are not completely out of luck. They will just have to work a little harder to receive the funding they need.
Having poor credit is a huge roadblock when it comes to getting a loan because lenders do not view you as a viable investment. In fact, they view you as a risk that might default. So, how hard is it to get a small business loan?
Although traditional lenders like banks and credit unions hold pretty closely to this idea, there are many great alternatives popping up to make the loan application process friendlier to all small business owners. Try these two out:
Get a co-signer
You can still try to get a loan from a bank if you have bad credit only if you also have someone to guarantee your loan. If you have a good friend or family member who really believes in your business, he or she can co-sign your loan, essentially taking on the risk. You need to remember that if you are unable to pay your loan, the payments will fall onto your co-signer and will affect their credit, as well.
If you do not want to burden any family or friends to co-sign your loan, you can always put up collateral to get approved. Some lenders are more likely to approve your loan if you pledge something valuable like your home in case you cannot pay off your debt. However, this is very high risk.
When looking into how to get a business loan with less than stellar credit, be very wary of payday loans and research lending options. Learn about all the types of loan options available to you and know the difference between a secured and unsecured loan.
Going into it, expect to have to work harder for approval and to have higher interest rates than someone with great credit. It is also good to meet with all your lending options so that you can be fully informed. Now that you understand the steps, it’s time to start looking for the right lender for your situation.