To be able to cater to business needs such as raw materials purchase or operational tools, personal loans—loans from family and friends—may not be sufficient which is why most small businesses subscribe to the idea of taking loans. Loans have helped most businesses achieve their set goals for their businesses as well as take their businesses to greater heights.
What are Online Loan Services
Online loan services are loan services that make funds available for use to business owners through online platforms offering quicker disbursement of loans and easier application processes. They are different from traditional banks in that you do not have to meet the officials physically before your requested loans will be made available to you.
Benefits of Online Loan Services
- Contact: They do not require physical contact with loan seekers before they can disburse loans.
- Less Bureaucratic: Online loan services are known to require less paperwork compared to traditional banks as the process of obtaining a loan is less tedious.
- Timeframe: Online loan services usually take less time in the disbursement of loans compared to traditional banks. In fact, some disburse loans to small business owners within 24 (twenty four) hours.
- Requirements: Online loan services have less requirements for obtaining loans compared to traditional banks. As a matter of fact, some may not require much personal details.
- Interest rate: Online loan services tend to have lower interest rates compared to traditional banks. Even though the terms of the loans collected still determine the interest rate, it is relatively lower.
- Collateral: Compared to traditional banks, most online loan services do not require collaterals before they can disburse loans, however, they may demand some information to confirm the authenticity of the business owner requesting for the loan.
Inasmuch as online loan services are much more convenient and flexible compared to traditional banks, some offer term loans only while others offer lines of credit and the rest offer both.
Top Online Loan Services for Small Businesses
According to a survey of 500 (five hundred) Americans commissioned by Forbes Advisor , these are some of the best online loan services specifically for small business owners. Note that they are not ranked here in terms of their competence:
Kabbage
OnDeck
Online loan services, without a doubt, serve as stress-free alternatives to traditional banks with less bureaucratic requirements. However, a number of factors must be taken into consideration when choosing an online loan service to borrow from.
Factors for Selecting an Online Loan Service
- Legitimacy: This is the most important factor to consider when choosing an online loan platform. This is because you will need to provide personal details before you can access loans so you need to be certain that they are not fraudsters or scammers looking for vulnerable persons to defraud. A good method for ascertaining the legitimacy of an online loan service is to check platforms like Forbes, search engines as well as seek reviews about such platforms on their sites or other sources on the internet.
- Ease of Application Process: While online loan services make obtaining loans easier for business persons, some platforms tend to have more complicated application processes for loans compared to the others which is why you must read their terms of service and conditions or alternatively, check for reviews about the various platforms' application processes before going on to apply.
- Loan Offers: Ascertaining the types of loans that online loan services offer is a major determining factor in choosing which platform to take a loan from. Some platforms offer short-term loans, lines of credits, long-term loans to mention the common. It is a wise choice to pick the loan service that offers the type of loan that best suits your business's need at the moment of applying for a loan as this will make achieving your goal relatively easier.
- Interest rates: Coming to terms with the interest rates that various online loan services offer is good practice as it better informs you on which platforms's demands you are capable of meeting. Some platforms offer low interest rates while others may offer slightly higher interest rates and all these depend on a number of factors chief of which is the duration of the loan among other factors. You have to evaluate your business's strengths before picking the loan service whose interest rates sits better with you.
- Customer Support System: Knowing that the customer support system of an online loan service platform is dependable and reliable is a good determining factor as to whether you should choose one platform or another. This is because mistakes happen and can be better addressed when their is a responsive customer support system waiting to help you address your issues. So ensuring that a loan service has a dependent customer support system is essential for choosing a platform to borrow from.
- Funding and Payback Options: Different online loan services have distinctive funding and payback options for borrowers even though some may have similar options. Knowing the options available to you and whether or not these options are convenient for you will serve as major determining factors in picking which online lending platform you should choose.
- Credit Scores: Credit scores serve as determiners of a person's eligibility for loans. They are metrics obtained from an assessment of a person's credit history and the risks involved in granting loans to the person involved. Credit scores serve as yardsticks for measuring the qualifications of businesses for loans and it varies from institution to institution. While many online loan services do not operate with credit scores, some may operate with them and their set scores approval will vary and so finding out beforehand, the credit score requirements of loan services, will better inform you on which one to opt for based on your eligibility.
While this is not an exhaustive list, it does make for a priority list of factors to consider in picking an online loan service to get a loan from.
The thought of having a less bureaucratic and flexible alternative to traditional banks for loans comes with a deep sense of relief. However, the number of available online platforms to get a loan from are not without their relative pros and cons for example; Kabbage, Lendio, BlueVine, Funding Circle to mention a few. Which is why you have to consider a number of important factors before choosing an online loan service such as its legitimacy, application process, interest rates, customer support system among others. Always endeavour to make informed choices when picking a loan platform and option for your business.
Check Forbes Ranking of Best Online Businesses Loans in 2023 for more information
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