For various reasons, a business may need to obtain a loan during its growth phase. Adequate financing can help a business stay afloat as it meets necessary business needs.
Due to various factors, a business may not be eligible for a traditional bank loan. However, following advances in technology and almost everything that happens online, companies facing financial difficulties can now borrow from online platforms.
Generally, when there are options for any situation, there are mostly pros and cons. The same goes for financing alternatives. The merits offered by online lending platforms are what will mainly propel a business towards securing funds from there.
Here are three main reasons that make online business loans favorable.
Quick application and financing
Small businesses looking for alternatives to PPP loans should consider online business loans. Online loans are arguably the fastest ways to get financing. Offline loan applications require a lot of paperwork or documentation, which can take days. However, someone applies completely online with an online business loan. The algorithms used even to check the eligibility requirements make the whole process much faster.
Since no voluminous documentation is required after the application is submitted and an online business loan is approved, borrowers are assured that their valuable documents are not floating around unnecessarily. Only essential pieces of information, for example, a tax identification number, social security number and financial statements are required.
Traditional loans can take days to be approved, but online lending platforms have solved this problem, and most of them provide fast funding within hours or the same day of application.
Online loan verification is done digitally which is very convenient for someone who needs an emergency loan. Offline sources of lending are generally slower and even more expensive for borrowers who desperately need money for any trips they may have to make.
Lenient requirements, easier qualification and more flexibility
One of the main reasons why a business may not be approved for a loan is if it does not meet the eligibility criteria. Collateral, guarantors and credit rating are usually primary considerations for traditional business loans. Those with poor credit ratings or unable to provide collateral or collateral are not approved.
However, many online lenders offer unsecured loans; these lenders do not require collateral or personal guarantee. Lack of collateral can occur for a business without collateral or valuable assets. Providing collateral is risky, especially for small businesses.
Even though online lenders still check a borrower’s credit score, they are less stringent and generally more concerned with a borrower’s ability to repay, for example, based on time in business or other commercial data. A business with substantial returns but a bad credit rating can still get a loan.
Online lenders offer great flexibility as most are available everywhere, unlike financial institutions and banks which have closing hours or may not operate on certain days such as public holidays. Whenever a loan application feels convenient, someone can apply online.
Traditional lenders like banks are usually strict on their terms such as loan amounts and payment schedules. A loan must be paid on time as agreed. However, many online platforms provide trading opportunities for those who cannot meet their obligations for whatever reason.
Greater variety with objectivity
A lender’s approach can provide ready-made products. However, there is a large pool of online lenders with different types of loan products such as term loans, microloans, merchant cash advances, equipment financing, invoice factoring, loans between peers and crowdfunding. Lenders also offer these loans at different terms, rates and terms. Whatever your business needs or goals, chances are an online lender can help you, whether it’s a loan for a start-up or an established business. Borrowers can therefore compare and choose a lender that best suits their needs and get approved if all goes well.
At first, one can choose what is appropriate without having to accept what is offered. Online lending marketplaces can even match a business with a suitable lender and offer a variety of lending options. Developments such as online banking, electronic signatures and digital records are now facilitating the prevalence of online business loans.
Additionally, the objective and algorithm-based criteria used by online lenders eliminates the subjectivity applicants may experience when physically approaching a lender. Some factors that are mostly irrelevant in a loan application, such as appraiser bias and personal details, are nothing to worry about.
Online lending will generally not be a relationship-based activity that benefits all parties.
An online business loan can enable a business to efficiently and quickly meet business objectives such as expenses, expansion needs, hiring needs, equipment financing, marketing, payroll management , etc.
With an online loan, a business can get a better chance of approval, with less stringent requirements, convenience, and a wider variety of choices. That’s not to say that online loans don’t have their downsides. Borrowers who feel that the pros outweigh the cons and that online business loans will improve the health of their business should consider them.