As a small business owner in the market for a small business loan, you may have more than once come across terms such as online lenders, marketplace lenders or alternative lenders. These are phrases that are all used to describe the new category of non-bank and unregulated lenders that have recently emerged with the main aim of providing financing to small businesses that banks and other lenders may consider too risky.
To be honest, resorting to online business lenders comes with its advantages and disadvantages. Nevertheless, this is not only a futuristic wave, but it is also the wave happening right now, especially to small businesses that are looking for loans.This should obviously be a prominent option for small business owners seeking finances for their businesses. More often, online lenders offer these three main products to small businesses; lines of credit, term loans and accounts receivable financing. Here are some advantages for considering online lenders, as well as disadvantages that you may have to deal with.
Advantages of Online Business Loans
There is arguably no other way to save time when it comes to looking for loans than going online. Unlike a hard application for traditional loans,applying for online loans is as easy as it can get. All you have to do is visit an online loan website, where you can compare the offer they give you to the offers of several other lenders. If you are satisfied with an offer, you will fill in the information required and wait for their response, which in most cases, can take as little as a day to get the financing you require.
Considering that the internet has made just about every part of our lives easier, you can apply for an online loan as well. Whether you decide to apply online while out for lunch, traveling or while watching a nice movie, you can actually do it when the time is convenient for you. This is based on the fact that the internet is open 24/7 and so are the online loan application websites.
With online lending, small business owners don't have to worry about numerous lenders having to access their credit reports every now and then. While too many requests for your credit report can have negative effects on your credit score, applying for an online loan or line of credit ensures that this negative effect is discarded because you only have one source tapping onto your credit report and information.
Online lending websites are advantageous in the sense that they let you compare several loan offers all at once on the internet. This is crucial and makes it easier to compare and get the best interest rates and terms possible. Again, remember that online lending can be a suitable option if you do not qualify for a bank loan and need funds immediately.
Disadvantages of Online Business Loans
One disadvantage that you may have to deal with when it comes to online loans is interest rates. Online business loans are known to have higher interest rates, especially when compared to traditional loans.
Considering that online lending programs for businesses are still in developmental stages, there are chances that your online lender may go out of business for one reason or another. One typical example is NetBank, which recently went under thereby causing significant hassles for their customers. One may argue that even a normal bank may go out of business, but there is statistically less a chance of that happening. It is therefore advisable that if you apply for an online loan, make sure that you go with a highly established and well-known lending institution.
All all, online loans are convenient and reliable for small business owners, particularly when there is an urgent need to pump more finances into the business. Try researching this type of funding program as an option in your quest to build your business empire.