Searching for an online lender is an involved process. In addition to basic considerations like the interest rate, fees and credit requirements, you also have to evaluate the various lending platforms available to you. With a variety of lending options available to business owners through peer-to-peer lending platforms, merchant account solutions, and other types of alternative lending options available to you, there is unprecedented access to lending. When looking for a business loan, there are a few things that you must take into consideration when searching for an online lender.
What are the first things you should look for in an online lender?
When looking for an online lender, there are certain factors you should look for with any lender. The small business owner should carefully review your interest rates. You don’t want to be saddled down with hefty interest rates for an extended period of time if you can pay off the loan quickly. If you are interested in the alternative lending option, understand all of the fees and policies you might be responsible for paying. Carefully reviewing the terms and contacting a representative may be able to go over the fees in further detail if necessary. While one online lender may have a lower interest rate, there may be a number of additional fees that could increase the overall cost of the loan. Review independent ratings from different forums to evaluate the potential lender.
What are your cash flow needs?
Your cash flow needs should be considered. If the loan amount is high, the cash flow available may be limited if the repayment period is short. Instead, you may want to extend the lending period to stretch your cash flow. You don’t want to find yourself in a position where you will have to renew the lending contract halfway through, which would ultimately increase the cost of the loan.
How solid is your credit?
Your credit is another important consideration. If you know that you will be pursuing alternative lending, you should consider your current credit standing. Alternative lending is available for those with diverse credit needs at a slightly higher rate. These lenders provide fast access to cash and can produce a fast turnaround within a day. The annual percentage rate can be higher for those with credit issues.
How do you conduct your business online?
Consider how you conduct your business online. If you conduct a lot of business online, you may have to explore the PayPal option. The e-commerce business solution offers financing with no credit check. The decision making algorithm takes into account the historical value of eBay transactions. With a strong revenue stream, you can borrow against anticipated revenue as a PayPal business customer.
How long has your company been in business?
Your business may not be as established as others, but that doesn’t necessarily disqualify you for lending altogether. If you have a minimum credit score of 575, you could be approved for an Accion loan if your cash flow and income can be documented. Businesses who have been in business for less than six months can be eligible for lending. There are some lending services available that make a fixed percentage of the value of credit card transactions processed on a monthly basis available to the borrower. Come merchant advance options offer up to 250 percent of their monthly credit card volume available to customers.
Do you have collateral available?
Collateral may or may not be a term the borrower is comfortable with putting up as a part of the application process. While a traditional lender offline may require collateral, appraisals, and frequent visits to the business, alternative lenders may not require as much. If you do have collateral, solid credit history, and don’t need immediate access to funding, you may be able to pursue funding through a traditional lender. Online alternative lenders offer a faster turnaround time and easy access to funding at slightly higher percentage rates. The alternative lending option is available to those who don’t want to use collateral as a part of the loan application.
There are numerous lending options available to business owners. Alternative lending has made capital accessible to business owners with a range of lending needs. Business owners are able to qualify for funding within six months of being open with some options. Others secure lending with alternative lenders by borrowing a percentage of their monthly credit card transaction volume. Understanding the terms, fees and rates are key in finding the right business lending options.