Best Online Business Loans
Accessibility of credit is essential to speed up the growth of a business. However, traditional lenders sometimes have too much of a stringent lending practice that makes it difficult for startups or small businesses to borrow funds. That’s why some borrowers turn to online lending platforms to seek credit for their much-required financing.
And in this article, you’ll learn what this specific loan type is, how it works, and the details of qualifying for one.
But before you begin reading the rest of this guide, take a look at some of the best lenders that offer online business loans:
- Best Rate
- Min. Credit Score
- Minimum Time in Business
Funding Circle
- 12.18%
- 660
- 2 years
Bluevine
- 15%
- 530
- 3 months
Credibility Capital
- 19.99%
- 650
- 2 years
- Best Rate
- Min. Credit Score
- Minimum Time in Business
OnDeck Capital
- 35.1%
- 600
- 2 years
Smartbiz
- 6.25%
- 660
- 2 years
Credibly
- 9.99%
- 500
- 6 months
- APR range
- Fees
- Terms
- Amounth
- Unemployment protection
Bank 1
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 2
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 3
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Table of Contents
How Do Online Business Loans Work?
When you compare online business loans to what’s offered by banks or credit unions, you will find that there’s virtually no difference: both can be secured or unsecured and can either be a line of credit or more of a term loan.
Perhaps the most significant difference is that online lending platforms are all processed at a faster rate from application through the delivery of funds, and everything is conveniently done over the internet.
Also, online business loans are usually more flexible in terms of use, with business owners allowed to appropriate the borrowed sum for virtually any business purpose. And with this key distinction comes obvious advantages for online loans, which is discussed in the next few paragraphs.
Requirements to Qualify
The exact requirements to qualify for a business loan online will depend on your chosen lender. For instance, some lenders will be a little more lenient with credit scores, while some will be slightly stricter.
But for the most part, what they would require is for a combination of credit and non-credit factors to be satisfied. Credit factors, of course, involve your credit score and history, and non-credit factors typically have to do with your business, like its years in operations, cash flow, and annual income. In some cases, the industry type is also looked at because lenders view this as a good measure of risk.
And if it’s a secured loan (collateral loan) that you want to apply for, lenders have to evaluate the asset you’re putting up as capital as well.
How Online Business Loans Differ From Banks?
Now, the question is, are online business loans truly the way to go? And how does it actually compare to bank loans? Let’s take a look at a few key differences:
Interest Rates
When it comes to the most attractive rates that you can possibly get, banks generally have that. However, this is afforded to borrowers with pristine credit scores and history, plus a good business track record. In other words, it’s not for everybody. Banks will be less likely to risk lending money to borrowers who may otherwise not have a well-established business yet.
Minimum Time in Business
If your company is new, you might have a better chance of securing funds with online lending platforms. As mentioned, banks tend to shy away from the extra risk, and a barely two-year-old company is exemplary of a risky proposition from a lender-borrower perspective. But in the case of online lenders, younger businesses are given the opportunity to borrow as long as they meet the lender’s revenue criteria.
Loan Amount
You usually can’t get a small loan amount from banks. If you’re looking to borrow as little as $1,000, then you’d best leave off banks from your choices. There are online lenders much more suited for such amounts.
Approval Time
It often takes weeks before your funds get to you with bank loans, and this is due to the many government regulations involved. If you need the money fast, online lenders would be a much better choice. Some lenders can approve your application within a few minutes to a few hours. What’s more, lenders also offer same-day funding, which lets you receive the borrowed sum on the same day of your application’s approval.
What Types of Business Loans You Can Find Online?
As we mentioned, you’d find the same loan options offered by banks or credit unions with online lenders. Here are just some of them:
- Term loans: This loan type is perhaps the most common one. It lets you borrow a lump sum amount for your business, and you pay back the entire amount plus interest over a particular duration.
- Short-term loans: Short-term loans are similar to term loans except that they have a shorter duration.
- Lines of credit: Business lines of credit are like credit cards that let you borrow any amount you need when you need it. Some online lenders also have this option available.
- Merchant cash advances: This loan type is a great option if you want to tie in loan payments with your business’s performance. Lenders that offer this product will lend you a fixed amount upfront, and you pay it back automatically from a percentage of your business’s daily sales.
- Equipment financing: Equipment financing enables you to acquire the necessary asset for your business through a loan. That equipment will also serve as the collateral until you pay off the entire amount.
How much can you borrow?
Loan amounts vary by lender and their credit requirements. As you would have expected, the better the credit score, the higher the amount you can borrow. But not only that, your business must be within their prescribed minimum years in business and is earning a specific amount of revenue that satisfies their requirements.
Assuming that you meet most requirements satisfactorily, some lenders will not find it difficult to loan you up to $5 million. Two examples of such online lenders are Bluevine and Smartbiz.
If that amount is beyond what you’re asking for, Ondeck capital lends a minimum of $5,000.
Taking care of your Credit Score will allow you to borrow a higher amount of money from different lenders.
Who Offers the Quickest Business Loans Online?
While most business loans online, in general, have a much quicker processing time, the fastest among the list of lenders we have above is fintech company BlueVine. BlueVine can provide you the borrowed funds within 12 to 24 hours, and this is available for most of BlueVine’s financial products.
OnDeck Capital comes in at a close second, with loan approval times of about 24 hours and funding time within the next day or so. However, OnDeck Capital doesn’t have a diverse product range as the business loan options it offers are only short-term loans and revolving lines of credit.
Does the Score Matter When You’re Applying Online?
The quick answer is yes, it does, and this is because lenders use a combination of personal and business credit factors in deciding whether to approve your application or not. Lenders try to get a comprehensive picture of your borrower profile as much as possible. This is so they can ensure that the person who owns the functioning business is also good for the money.
With that, they take a peek at your credit history and look at how you manage your debt and if you have ever been late on payments or have declared bankruptcy at one point.
Online Business Loans Guaranteed Approval
Still, the truth is there’s no guarantee that you’ll get approved for the loan you want — even for lenders that can process your application and dispense your funds on the same day.
If your credit isn’t too good, then that reduces the probability of getting approval, and that goes the same for a relatively new and low-earning business.
And despite having both credit and business requirements satisfied, sometimes lenders get discouraged from lending you money because of the industry to which your business belongs.
Most online lenders have been a bit more relaxed when it comes to requirements recently, so all you have to do is to shop around for the one that suits you.
Frequently Asked Questions (FAQ)
Most lenders require a business to be in operations for at least two years, and the borrower should have a solid credit record.
You can apply for an unsecured debt with an online lender. Most online lenders judge your application based on a combination of business and credit factors.
The first thing you have to do to get a business loan online is to look for an excellent lender and check its requirements. If you think you meet most of it, you can proceed by submitting your documents for prequalification.
Most lenders set a minimum 2-year time in business as a requirement, but there are lenders who’ll let you borrow money even if your business is only 3 months old. But the catch is, you’d have to pay a much higher interest rate for such a loan.
Check with lenders who can lend up to that sum. Usually, to get the maximum amount, you’d have to meet the lender’s requirements satisfactorily.
