Loan options for small business owners used to be limited. Entrepreneurs had to trudge down to the local bank, present their case and hope for the best. Now business owners can get approved for small business loans online from the comfort of their own home or even from their mobile phone.
Online lenders leverage technology to quickly assess the heath of a small business, leading to much faster credit decisions. Small business loan applications are now integrated with online accounting programs, IRS tax records and bank statements, streamlining the process. It’s safe to say that gathering information and uploading documents has never been faster and easier.
If you’re considering a small business loan online, here’s what you need to know.
Benefits of a Small Business Loan Online
Two words: speed and ease. A 2016 survey of small businesses by the Electronic Transactions Association, identified the top reasons business owners chose an online small business loan. Sixty three percent said they chose an online loan because of the speed to funding. Fifty seven percent said the easy application process.
How the Online Application Works
A major benefit of online business loans is the streamlined application process. Depending on the loan, you’ll need to upload information and paperwork. Each lender varies but this article gives you a good idea of what might be requested: Application for a Business Loan: What You Will Need.
Here are popular types of small business loans you can get online – SBA loans, bank term loans, business lines of credit, and merchant cash advances.
If you qualify, the Small Business Administration’s low-cost loan programs can be your best option. SBA loans have low rates, long terms and very low payments to fuel stability, growth and savings. The most popular option is the 7(a) Loan Program.
The 7(a) Loan Program
An SBA 7(a) loan can be used for a variety of purposes.
- Working Capital – Purchase equipment, increase inventory, add marketing programs, for operating expenses to hire additional staff.
- Debt Consolidation Loans – Refinance merchant cash advances, short-term business loans, high interest business loans, daily or weekly payment loans or business credit cards.
- Commercial Real Estate – Refinance an existing commercial real estate mortgage, buy an office building or other owner-occupied commercial space.
For in-depth information about the popular SBA 7(a) loan program, visit the SmartBiz Small Business blog and review our comprehensive article: What is an SBA Loan?
Although SmartBiz Loans is not an online lender, we match you with the lender most likely to fund your loan. In fact, nearly 90% of loans referred to a SmartBiz bank partner are approved. Get started here and you’ll know in just minutes if you’re pre-approved with no impact on your credit score. SmartBiz reviews a soft-pull of credit which does not impact your credit score. When your application proceeds to funding and is matched with a lender highly likely to fund your loan, a hard pull of credit is requested and appears as an inquiry on your credit report. For more information, read Credit Scores: Hard Inquiries vs. Soft Inquiries.
Bank Term Loans
If your business isn’t quite ready for an SBA loan, or need funds more quickly than an SBA loan, consider applying for a bank term loan. SmartBiz currently offers term loans through its bank partners for working capital, debt refinance and new equipment purchase:
- $30,000 to $200,000 loan amounts
- 2 – 5 year repayment terms
- Fixed interest rate*
- Monthly repayments
- No pre-payment penalties
* Interest rate depends on loan term and the applicant's credit and financial profile.
Business Line of Credit
A line of credit is a type of revolving account. Traditional term loans, whether backed by the SBA or not, have a preset sum deposited upfront that’s repaid through equal payments over time. Lines of credit on the other hand, create a “revolving” cycle where borrowers can withdraw funds up to a set maximum at any time, repay that amount, and withdraw it again.
Typically, lines of credit can be either secured or unsecured. In most cases, they are unsecured loans. This means that the lender doesn’t need any collateral to back the account.
For more information read Small Business Lines of Credit Pros and Cons.
Merchant Cash Advances
A merchant cash advance (MCA) is most often used by small businesses that accept credit and debit card sales. You receive a specific sum in advance that is repaid either by a percent deduction from daily transactions or through daily or weekly payments.
Keep in mind that MCAs often lead to extremely high annual percentage rates. Even the minimum within the range can be several times larger than term loan annual percentage rates and can reach up to well over 300%. For more info, read What You Need to Know About an MCA
Get Ahead of the Game
No matter where or how you apply for a small business loan, it’s important to keep an eye on the financial health of your business. Strong credit scores, steady cash flow and careful debt management are all factors that will impact your ability to secure low-cost funds to fuel future growth.
Large corporations have a Chief Financial Officer (CFO) or another financial professional on board to help manage business finances. Of course, that’s usually out of reach for a small business startup. Fortunately, entrepreneurs now have access to a smart solution. SmartBiz Advisor—an intelligent online tool—can help you learn how to build your business lending profile by educating you about factors that banks consider. You’ll learn where your business stands for each of key areas banks use to evaluate your business, such as: debt coverage, debt usage, credit, and business revenue trends.
Simply create an account, answer a few questions and you’ll get your unique Loan Ready Score. If you’re not quite ready, SmartBiz Advisor give actionable advice you can use to shape up your financial profile. Learn more and sign up here – it’s free! Let SmartBiz Advisor be your Intelligent CFO.
* The information provided through SmartBiz Advisor, including the Loan Ready Score, is for educational purposes and is not the same as scores used by lenders for credit decisions. SmartBiz Advisor is not a financial or legal advisor as defined under federal or state law. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.