Starting and running a business takes significant capital. While some entrepreneurs are able to self-fund their ventures, most need access to financing in order to get their operations off the ground.
Traditionally, securing a business loan required countless hours spent filling out paperwork and physically visiting banks and lenders. Fortunately, the process has become much simpler thanks to business loans.
Getting an online business loan can be quick, easy, and convenient when you know where to look and how to apply. If you need funding to start a business, cover operating expenses, or expand your existing company, here are some tips to help you easily get a business loan online.
Understand the Different Types of Online Business Loans
Not all online business loan are identical. The type of loan you apply for should be based on your specific needs. Some of the main options include:
1. Term Loans
Term loans provide a lump sum that is repaid over a set period of time, usually with fixed monthly payments. These loans work well for major one-time expenses like purchasing equipment or real estate. Terms are often between one and five years.
2. Lines of Credit
Lines of credit provide access to ongoing funding that can be drawn upon as needed, up to a set limit. Only interest accrues on the amount borrowed. Lines of credit allow flexibility since you only take what you need. They work for operating expenses and lean times.
3. Merchant Cash Advances
Merchant cash advances provide a lump sum in exchange for a percentage of your future credit or debit card sales. Payments adjust based on sales volume. Merchant cash advances provide easy qualification and quick funding but have high costs.
Choose the Right Lenders
All online business lenders are not equal. Funding companies vary significantly in their offerings, rates, qualifications, and reputations. Spend time researching and comparing lenders to find the ones that best match your funding needs and qualifications. Look for companies with a transparent application process, competitive interest rates and fees, flexible payment terms, and, importantly, a positive reputation
The right lender is more interested in helping your business succeed than simply making a buck off their loans. Seek out established, reputable companies with a track record of satisfied borrowers.
Check Your Qualifications
Online lenders have more lenient qualification standards than banks, but you must still meet certain requirements to get approved for a loan. Many lenders list eligibility criteria on their websites so you can check if you qualify before applying.
Typical requirements are: being in business for at least 6-12 months; having minimum monthly or annual revenue, sometimes as low as $5,000; having a minimum credit score between 500-650, with higher scores getting better terms; and having acceptable debt-to-income ratios if carrying existing debt.
If your business is very new or lacks adequate revenue, you may need to look into alternative funding sources, like small business grants, instead of an online loan. Briefly researching the lender’s qualification criteria ahead of time can save you the time and effort of applying if you clearly do not meet the requirements.
Gather the Needed Documentation
To process your application, lenders will ask for documentation related to your business. Having these ready ahead of time leads to faster processing and better chances of approval. Items commonly required include:
- Business and personal tax returns
- Business bank statements
- Business license and official registration documents
- Proof of business address
- Accounts receivable statement
- Debt schedules
- Profit and loss statements
- Projections and forecasts
The more organized you are, the smoother the lending process will go.
Compare Loan Offers
It never hurts to apply to multiple online lenders when seeking a loan. Each will provide a loan offer presenting proposed terms if you are approved. Comparing offers side-by-side lets you find the best rates and terms.
Some key things to look at when comparing offers include interest rates, origination fees, repayment terms, and collateral requirements. A little time spent upfront comparing loan offers can save you thousands down the road. Don’t automatically accept the first one you receive.
Tips On Getting Quickly Approved for an Online Business Loan
Accessing needed capital quickly is critical for business survival and expansion. Online business loans allow fast and easy funding, but you still need to take steps to improve your approval odds and speed up the process. Here are some tips to get approved fast:
- Maintain a strong credit score above 650. Higher scores mean better terms and faster approvals.
- Have all your documentation ready to submit. Disorganized applicants take longer to process.
- Start with lenders offering streamlined approvals and funding. Some lenders provide funding in as little as 24 hours.
- Avoid applying for loans from multiple lenders simultaneously. Too many inquiries can delay approvals.
- Respond promptly to lender requests for additional info. Lagging on submissions slows down applications.
- Be ready to explain any red flags or concerns lenders may identify. Proactively addressing issues prevents delays.
While a business loan is rarely secured overnight, you can expedite the process by establishing trust and confidence with the right online lender. With good preparation and an organized application, you can expect funding within days or weeks, not months.
Use Your Loan Wisely
Getting an online business loan is the first step. The next step is putting the capital to good use. Before securing financing, put together a business plan detailing how the funds will be allocated. Track how the money is spent to ensure it goes towards productive purposes that generate returns for your business.
Just make sure you borrow an amount realistically aligned with your needs and repayment capabilities. You can make the most of your new funding source with strong planning and fiscal discipline.
The Takeaway
Accessing capital is essential for any growing business. Fortunately, online business loans make financing quick, convenient, and achievable. Finding the right loan product, lender, and offer takes research and diligence.
But the effort is well rewarded once your business has the cash to take the next step. Just make sure to borrow wisely and have a plan to make the most of the funding for your company’s long-term success.