Article Summary: There are more small business loan options available today than ever before. The technology associated with online applications for small business loans also makes it easier to research and apply for a loan.
That being said, it involves a lot more than simply publishing an application online. The most successful online lenders are looking at the small business loan process from a different paradigm and evaluating the health of a business differently than a traditional lender like a bank or credit union. What's more, technology and a willingness to look at all the information associated with a healthy business is allowing these lenders to make credit decisions quickly and offer capital to businesses in days rather than weeks or months.
Continue reading to learn more and get answers to some of the most frequently asked questions associated with applying for a business loan online.
Technology is changing everything. From the way we make travel arrangements, shop at the department store, hail a cab—and even the way business owners apply for a small business loan. Similarly, many lenders are turning to online applications for small business loans.
As more and more people do business on their smartphones, tablets, and computers, it’s no wonder that online applications for small business loans are the preferred choice of many business owners. In fact, one of the top three reasons cited for choosing an online business loan in a survey conducted earlier this year by the Electronic Transactions Association, was the easy application process.
Along with speed to funding (63 percent) and affordable total loan cost (51 percent), 57 percent of those surveyed identified that easy online applications are one of the primary reasons they opted for an online business loan. When you consider the traditional weeks-long process and reams of documents associated with a traditional loan application, a simple, easy-to-understand, online loan application makes a lot of sense for time-crunched small business owners.
Nevertheless, Simply Putting an Application Online Isn’t Enough
A small business owner shouldn’t have to be a financial expert to complete a loan application; and small business lenders (like OnDeck) are embracing a new paradigm to provide business owners with efficient access to the capital they need to build growing businesses that strengthen communities and create jobs.
By looking at small business lending and the qualification process differently, these lenders are turning traditional credit models that rely heavily on personal credit score and specific collateral on their heads. Since we opened our doors in 2007, we’ve loaned over $8 Billion to more than 80,000 small business owners—which has taught us a thing or two about small business borrowers and how to evaluate a small business’ creditworthiness.
Additionally, a safe and secure online applications process is important to business owners whether they’re borrowing $5,000 or $500,000. At OnDeck, your loan application is protected by encryption and Transport Layer Security (TLS) protocol to ensure your sensitive information is securely sent to OnDeck.
Frequently Asked Questions When Applying for a Business Loan
Do I need collateral to get a small business loan?
Some lenders, including many traditional lenders like the bank, do require specific collateral for a small business loan, meaning many potentially good borrowers could struggle to access the capital they need because their business doesn’t have the needed collateral to secure a loan. We do not require a specific type of collateral, but do require a general lien on business assets along with a personal guarantee to secure an OnDeck loan.
Can I get a business loan without being a corporation? Can a sole proprietor get a business loan?
You do not need to be incorporated to get a small business loan provided you are a registered business with a business checking account and have a business tax I.D. number. You must also use your business loan strictly for business purposes. However, there may be potential benefits to incorporation and you should consult with an attorney or other trusted legal advisor to determine if changing the nature of your business entity makes sense for your business objectives.
Can I get a business loan after a bankruptcy?
Qualifying for a business loan following a bankruptcy will be more difficult during the 10 years after the bankruptcy appears on your credit report, but there are lenders that will work with your business if the bankruptcy has been discharged for at least two years.
Can I get a business loan with a less-than-perfect personal credit score?
Regardless of the lender, your personal credit score will frequently be a part of your business’ creditworthiness evaluation. Nevertheless, traditional lenders are likely to weight the value of your personal score more heavily than many online lenders do, so if you have an otherwise healthy business and can demonstrate that your business has the cash flow to make timely loan payments, it is possible to qualify for a loan with a less-than-perfect personal credit score.
Because lenders look at your past credit behavior as a way to evaluate what you will do in the future, you should be prepared to explain any extenuating circumstances that may have contributed to your poor personal credit profile. As a general rule, a personal credit score below 680 will make qualifying for a loan at the bank problematic and a score below 650 will likely rule out an SBA loan, so if your personal score is below the 650 threshold, you’ll likely need to look at alternative financing options, but it is possible to gain a loan approval. Nevertheless, taking action to improve your personal credit score, while it might not guarantee a loan approval, will give your business financing options you might not otherwise have.
Do I need a business plan to get a business loan?
Traditional lenders like banks, credit unions, and the SBA often require a business plan, however many online lenders look at other business metrics and don’t require a formal business plan.
What documents do I typically need for a business loan?
Depending upon the lender there will likely be different document requirements, but having these documents (or at least the information) at your fingertips will make it much easier to apply for a loan at the local bank or an online small business lender regardless of whether or not the documents are required:
- Your business financial statements including a Profit and Loss (P&L), an Income Statement, and an outline of your expenses
- Your personal financial information including the last three years of personal income tax returns
- Your business license
- A copy of your business lease
- You business bank statements for the last three months
See also, “What do I need for an SBA loan?”
How do I get a startup loan?
Aside from the SBA—which has a guarantee program for well-qualified startups—there aren’t a lot of small business loan options for very early stage startups. Most traditional lenders prefer to see a few years in business, although many online lenders (like OnDeck) will work with a business that has at least a year in business. Some non-profit micro-lenders do offer business loans to qualifying startups.
Do I need collateral to get an equipment loan or lease?
The equipment you are leasing or buying is usually considered the collateral in an equipment lease or equipment loan.
Do I need a personal guarantee to get a business loan?
Small business owners are frequently required to give a personal guarantee when applying for a small business loan.
How do I apply for a small business loan?
If you are applying for a loan at the local bank or credit union, you traditionally will meet with a loan officer in the branch office and be given the appropriate forms to complete the application.
How do I apply for an SBA Loan?
The SBA is not a lender, but offers a loan guarantee program with banks, credit unions, and other lenders. You can apply at participating banks. The SBA’s Lender Match tool will help match you to a participating lender in your area.
How do I apply for an online business loan?
If you apply for an online business loan, you will generally complete a simple online application as described above.
How do I know if I can trust an online lender?
You can start by checking their Better Business Bureau ranking and look for mentions of them in news organizations like CNBC, Bloomberg, PBS, and others. You can also look for them on third-party review sites like TrustPilot.
Read what our customers say about us on Trustpilot
How long will the online application process take?
OnDeck’s easy business loan application process will get you a decision in under an hour and often funding as fast as one business day.
Do I have to apply online for a business loan, or can I call?
You can apply online anytime or call a loan specialist from 9:00 am EST to 8:00 pm EST at 888-269-4246