It used to be that businesses wanting to finance their growth had few options. Using their own savings, getting loans from family and friends, pitching their business to investors, or securing a traditional bank loan were some of the more popular ways to get cash for business development. Lately though, there are some new choices in the business lending market, and that includes getting a business loan online. Online lenders are filling a gap by assisting businesses that might not otherwise qualify for a business loan. With the use of traditional indicators like credit scores and balance sheets, online lenders also take other aspects into account when reviewing loan applications, like social media presence and relationships with suppliers and vendors.
Preparing to apply for a small business loan online
While online business lenders are not as strict as their traditional counterparts, that doesn’t mean you shouldn’t take the application process seriously. First, you should review (or create if you don’t already have one) your business plan and outline how much money you need, exactly how you plan to spend it, and how long before you’ll see a return. Make sure the cash flow you project is enough to repay the loan.
Next, contact one of these business credit reporting agencies (Dun & Bradstreet, Experian, or Equifax) or call a business credit monitoring service and review your current score. Business credit scores are on a scale of 0 to 100 (100 is perfect). A score of 80 or more is considered good. If your credit score is below 80, you should work on improving it to ensure you get the best terms for your loan. This may mean getting rid of some of your debt or obtaining credit with suppliers and using it responsibly.
Before you apply for a loan, you’ll have to obtain all documents to establish your credit worthiness. These documents should show the business’ good financial habits as well as those of the owner(s) personally. You also must be able to provide collateral (like ownership of a home or vehicle) to obtain the loan. Documents you’ll need include tax returns, balance sheets, and proper business licenses and permits.
Related: Get Quotes for a Small Business Loan
How to shop for a small business loan
One of the benefits of pursuing business loan online is that there are so many options to choose from and you can easily compare deals. Before you start, decide which type of loan you should secure for your business. Some options include short- or long-term business loans, SBA loans, personal loans (if your business does not have a long financial history), business lines of credit, and merchant cash advances. There are positives and negatives to every type of loan. Research and determine the type of loan that will work best for your business’ own situation.
Once you’ve identified loans that will fit the needs of your business, read up on the terms and make sure your check out the fine print. Some loans have hidden fees or exorbitant interest rates.
Some online services are automated to help you identify loans and lenders that meet your specific requirements, which makes the process even simpler.
Related: Sign up to receive the StartupNation newsletter!
Getting your small business loan online
Once you’ve found a small business loan that is right for you and you’ve prepared the necessary financial information, the online loan application process is pretty simple compared to other lending options. Because alternative online lenders move at the speed of the internet, loans can often be funded within a day or two of getting approved. Once you have your money, it’s time for you to apply it to your business plan and get ready to grow!
This article originally appeared on LendingTree.com on Nov. 11, 2016.
Content sponsored by LendingTree.
