Online loans for small business can be an alternative when other funding options fail to deliver. But getting the right funding for your small business is key. Here are seven things you need to ask before you sign up.
Things to Ask About Online Loans for Small Business
How Do You Pick Your Lenders?
The process is simple. You start by supplying some basic information through a secure internet connection. Next, a short phone call confirms your info and matches you with a lender. A short application is usually all that’s required after that to get a loan. Make sure a lender walks you through the process. Asking about how the marketplace puts the list of lenders together helps you to understand their methods.
How to Choose Among Online Funding Platforms?
Using online funding platforms cuts down on the red tape you can face by dealing with lending institutions directly. Hanna Kassis, an expert at InvoiceFinancing.net, shares his insights with Small Business Trends.
“These are all products that are supported by existing cash flow,” he says. “Without that, you need to go to an investor.”
Finding out if you’ve got a good fit requires asking for an online marketplace’s pitch. Start by finding out if they are familiar with your specific industry.
Is the Connection Secure?
When and if you decide to move forward with any of the offers you’ll get from various online funding platforms, you’ll need to submit some information like bank statements. Ask about an online funding marketplace’s security measures. Their url should start with https.
How Long Does Online Funding for Small Business Take?
Of course the whole point of online funding for small business is to get financing faster than possible when going to the bank yourself. However, you need to find out exactly how much faster.
Scott Shane, Professor of Entrepreneurial Studies at Case Western Reserve University, writes, “Small business owners are often time constrained as well as cash constrained and need access to credit without spending hours on paperwork. Online lenders typically have much simpler application processes than banks and are far faster at making loan decisions. Instead of taking a few weeks to make a loan decision, online lenders typically take only a few hours.”
How Strict are the Requirements Compared to Banks?
Although the documentation you’ll need is often less extensive when seeking online funding for small business, the gap is closing according to published reports. Make sure you know what you’ll need for the application that’s often the final step in getting funded.
How Will Your Information be Used?
You need to keep in mind online funding marketplaces are building their own credit models. Ask if your information is being shared with third parties.
And since quite often sources ranging from search results to utility bills are used to determine creditworthiness, it pays to know exactly what kind of information is being mined.
How are Payments on the Loan Made?
Asking out the terms and the repayment schedule required under your loan is also very important. Quite often an automatic electronic withdrawl is the only option. Keep in mind here the interest payments are generally higher than more traditional lenders so you’ll need to have more money on hand.
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