There are times your business may experience cash flow problems. An online business loan will come in handy at this time; whether it is paying for an emergency bill or you need extra stock for a long weekend.
What is an Online Business Loan?
This is a type of online loan tailored for SMEs to cover for unforeseen costs or even as capital for starting, or expanding the business.
The underlying factor is that they are accessed online via your mobile phone.
Types of Online Business Loans
The ever-changing business loan needs have spurred the growth of different loan products for businesses. Here are the popular online business loans you will find.
- Instalments/term loans
- Small Business Administration (SBA) loans
- Business lines of credit
- Merchant cash advances
- Invoice financing
- Equipment loans
- Marketplace loans
- Commercial mortgages
- Rollover for startups
Online Business Loan Application
Applying for an online business loan is easy and straightforward. Visit a particular lenders website or app, register an account, feed it with the necessary data, and apply for a loan. Some online lenders may require documentation sent via attachments. The requirements include social security number, tax ID, business ownership details, and in large loans, financial statements may be required.
Just as in traditional versions, online business loans also require a personal guarantee. This is an individual’s legal promise to repay loans issued to businesses or companies in which they serve as an administrator, executive, or partner.
Why Online Business Loans?
In the past, it was difficult to access loans, as banks were the only reliable lenders. A lengthy approval window is not what you want when you are in such a fix. You probably don’t have time to go to the bank also.
The advantage of online loans is that it is a 24/7 service and you can apply for them from wherever you are on your mobile phone. The application process is simple and straightforward. You can get a loan in a record 10 minutes, and that’s not even the best part is. The best part is, the funds are sent to your bank account instantly upon approval. Most importantly, the interest rates of online loan companies are very competitive. The flooded online loans market has forced lenders to keep their rates low to stay afloat, which is another advantage of online loans.
While online business loans have had a significant impact on SMEs, they also come with some shortcomings. First, the FinTech industry is pretty new and thus, heavily unregulated. This may put borrowers at risk. Also, online loans are characterized by high-interest rates, confusing rates, and interest deductions, all because of false advertising and hyped marketing on digital platforms. Lastly, online business loans may have stringent requirements and shorter repayment schedules which shoot up the instalments.
Factors to Consider when Applying for an Online Business Loan
Before applying for an online business loan, it is imperative that you consider the below:
1. Loan amount: Have a clear plan of how much you want to borrow, and most importantly, how you are going to use the funds.
2. Interest rates: The lower the interest rates, the better for your business. Look around for lenders with the best interest rates and keep vigil of any hidden costs.
3. Repayment period: A flexible loan repayment schedule is a priority. An extended repayment plan will mean less pressure on your business’ financial well being.
Selecting the Best Online Business Loan Lender
The most crucial aspect when looking for an online business loan is choosing the right lender. The market is flooded with online loan companies; some reliable and trustworthy while others are dubious and questionable. Always deal with the renowned lenders, especially the FinTechs with backing from traditional banks. You don’t want to meet hidden costs, unrealistic interest rates and burdensome penalty fees along the way!