About Small Business Loans Online

The rise in popularity of online lending has made it very common these days for companies to turn to small business loans online for their financing needs. As advanced tools and technology have streamlined the process of evaluating credit scores, online lenders are often able to determine loan eligibility in a more efficient manner. Today, these lenders can provide a simple way to apply for a line of credit or a small business loan online, and some even offer dedicated support as well as helpful comparison tools like OnDeck.

Many online lenders use technology to evaluate businesses differently from traditional processes. For example, online lenders may access a business’s transactions and cash flow via their bank account’s website, or examine other digital data points to analyze business health and creditworthiness. The use of digital information and automated systems can sometimes drive much faster credit determinations for a line of credit or a business loan online.

Short-Term Online Business Loans

Business loans online are usually available in the form of a term loan, which is repaid in regular payments over a set period of time. A term loan with a brief repayment period is referred to as a short-term loan.

These loans may provide small businesses with terms that can range from three to 24 months. They are often used for specific purposes such as purchasing inventory and launching marketing campaigns or for working capital. Generally speaking, short-term loans could be a good fit for temporary business financing needs, given their shorter time frames. Small business owners that require funds for initiatives that span a more significant period of time may find that these term loans don’t quite meet the scope of their projects.

As with other types of financing, like a line of credit, you’ll likely need to take your credit score into account when looking for a short-term business loan online. The exact requirements of these loans will depend on the source, but it is fairly typical for lenders to consider your credit score when you apply. Even if your application is approved, your credit score can also have an impact on the rates and fees of your short-term loan. While this isn’t always the case, you should keep your credit score in mind when deciding whether a short-term loan is the right option for your business. It’s worth noting that some lenders may check both your personal and business credit score when determining whether you are eligible for financing. For this reason, you may want to ensure that your overall finances are in good shape before you apply for a loan.

Long-Term Online Business Loans

A term loan with a wider repayment period is referred to as a long-term loan. As opposed to short-term online business loans, these types of loans can provide small business owners with terms that can range from one to five years. They are often well suited for longer-term projects such as major renovations or business expansion. However, long-term loans could be used for more general purposes by businesses that are simply looking for larger loan amounts. Compared to other forms of financing, a longer-term business loan can sometimes offer access to more funds due to their longer repayment periods. The loan amounts that your business is eligible for will vary by lender, and the qualifications of your business will likely have an impact as well.

Your credit score may also play a big part in various aspects of a long-term online business loan. Aside from its potential impact on loan eligibility, your credit score could grant you access to a broader selection of repayment terms, depending on the lender. When it comes to long-term loans, this can be a critical factor due to the fact that the terms of these loans can vary so widely. That being said, you may still be able to find a long-term business loan online that works for you. Different lenders have different requirements for their loans, and your credit score will not always be a key consideration. In addition, while you may not be able to apply for them entirely online, the U.S. Small Business Administration (SBA) may offer access to certain SBA loans that could work for your credit score. That’s why it’s a good idea to look into the specific criteria of any term loan before you apply.

Application Process

A major benefit of securing a line of credit or a business loan online is the easy and straightforward application process. Simple loan applications that can be completed on the internet, over the phone or via fax are often a hallmark of online lenders.

Although they don’t always require all of the same documentation traditionally needed to apply for a loan at a bank, there are certain things you may need to have at your fingertips when completing your application, including your:

  • Social Security number
  • Business tax ID
  • Business bank account or paper bank statements (for certain lenders)
  • Financial statements (for larger loan sizes)

Many small business owners appreciate how quickly their loan application can be reviewed. An answer is often available within hours, and funds are usually deposited in their bank account in a day or two. A survey conducted of small businesses by the Electronic Transactions Association found that the top two reasons these businesses chose a small business loan online were the funding speed (63%) and the easy application process (57%).

Rates and Fees

Online business loans tend to have both an origination fee and an interest rate, among other types of fees. These will vary by lender, term and risk, and may be different from other options such as a merchant cash advance, an SBA loan or a line of credit.

Repayment methods also vary depending on the lender, so make sure to do your research and find the best fit for your business. Many lenders, including online lenders, may require a fixed repayment amount on a daily or weekly basis, while others may only require a traditional monthly payment. Keep in mind, repayment terms may differ if you are applying for a line of credit, an SBA loan or another type of financing.

Qualifications and Requirements for Online Business Loans

These both vary from lender to lender, but here are some general guidelines:

  • Minimum Required Time in Business: Usually between 1 – 2 years
  • Minimum Annual Revenue: $100,000 – $250,000 or more
  • Minimum Personal Credit Score: 500 – 650
  • Industry: Industry requirements vary, but restricted industries sometimes include financial services, homebuilders, real estate investors, etc.

Considerations

As with any type of loan or line of credit, make sure to do your research and choose your lender carefully. The security, efficiency and caliber of lenders can vary.

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