When you're a small business, you have to get help wherever you can. Getting capital from a bank isn't simple, especially if your company is under two years old or if your loan is considered to be too small. The good news is that traditional bank loans aren't the only option anymore. Although online lending is relatively new, it's becoming increasingly popular for small business owners who are looking for business funding or working capital.
Read on for five tips that will help you while applying for funding online.
Trying to get a small business loan from my bank is a nightmare. Are there any non-bank business loan alternatives?
1. Do your due diligence
The future of your company could rest in your lender's hands. And always remember, one bad loan can take down a business. Therefore, it's important to complete thorough research before choosing which lender to go with. Read reviews from other borrowers about their terms and conditions, their level of service, and their interest rates. Look for lenders who offer their loan terms up front, have clear security disclosures on their web pages, and have a physical address.
That said, it is absolutely imperative to know that most online small business loan companies are NOT finance companies; they are call centers ran by salespeople with zero knowledge, background, or experience in business, or finance. Think about that for a second.... No education. No experience. No certification. No schooling. No classes. No tests. No courses. No No nothing. Why is this allowed to happen? Because there is NO regulation, or oversight within small business finance. That means that most small business owners who are searching for online business loans are taking business and finance advice from sales teams that literally know nothing about business, or finance. As ridiculous as that may sound, it's very real, and very true. Hence, why literally thousands of small business owners are getting burned when shopping for fast small business loans online. Don't be one of them!
2. Pay attention to security
After ensuring the lender is reputable, next check that you only input sensitive information when you have a secure website connection (look out for site addresses which begin 'https' and display the green padlock symbol). Lastly, stay away from lenders who want application fees or down payments. These are usually scams since most lenders will actually add these costs to your repayment plan.
3. Get your books in order
While online lending is generally more flexible, which is good for your small business, it doesn't mean lenders will approve all loan applications. Just like a traditional bank, they're going to require proof of your identity, bank statements, as well as all the necessary business documentation. If you're concerned about keeping all your documentation organized, consider using online accounting software to make the process smoother.
For example, merchant cash advances generally have the highest APRs and repayment is usually daily or weekly. On the other hand, online loan terms have higher APRs than traditional bank financing but significantly lower rates than merchant cash advances. The repayment terms for this option usually vary from weekly to monthly too. Just keep in mind, attaining small business capital loans is all about criteria, and each business funding product has a different set of underwriting guidelines.
Another important feature to consider is whether you can prepay without penalty. A strategic funding source like LVRG actually offers pre-pay discounts, while many online lenders charge pre-payment penalties.
4. Inquire about additional services
When you're applying for funding online, it's worth checking whether your chosen lender offers any additional services that could benefit you during the application process, as well as in the long-term if your application is approved. These services could include technical advice (offered for free), as well as help with growth plans and any future financing needs. Click here to contact us about a free small business cash flow analysis.
5. Unsolicited services and contact
If you are getting non stop telemarketing calls saying you are pre-qualified for fast small business loans and merchant cash advances, it's always a sign of a predatory lender. And yes, you should hang up the phone immediately. In fact, there are now thousands of online business loan lenders who buy lists and sit in call centers blasting business owners with calls. If a “lender” offers you a loan unsolicited, it's typically a sign of a scam. Real small business loan lenders don’t offer loans with a cold call, it's simply not ethical practice.
Securing your small business financing online is easier and safer than ever before (when you're dealing with a long standing, reputable finance company like LVRG). There are plenty of things that can stop your company in its tracks, but don't let capital be one of them! Contact LVRG today to find out more about our online application process.