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Comparing Online Business Loan Providers

Comparing Online Business Loan Providers

Traditional Banks vs Online Lenders

Traditionally, small businesses would visit their local bank branch to apply for a loan. While banks can still be a good option, the process often involves a lot of paperwork, strict eligibility requirements, and long wait times for a decision and funding.

Online lenders emerged in recent years as an alternative source of financing. Also known as alternative lenders or fintech lenders, these companies provide loans through fast online applications and can deliver funds in as little as one business day.

Compared to banks, online lenders often have:

  • Simple applications with quick decisions
  • More flexible eligibility requirements
  • Faster access to financing
  • Higher interest rates

So while online loans may come with a higher cost, the speed and convenience make them ideal for time-sensitive needs or borrowers that may not qualify through traditional banks.

Top Online Small Business Loan Providers

Kabbage

  • Loan amounts: Up to $250,000
  • Term lengths: 3, 6, 12 months
  • Rates: Variable from 1.0% to 1.2% per month
  • Highlights: Fast application and funding in as little as 7 days. Flexible terms based on revenue.

OnDeck

  • Loan amounts: Up to $500,000
  • Term lengths: 3-36 months
  • Rates: Fixed rates from 9.99% to 79.9% APR
  • Highlights: Quick application decisions and funding. Dedicated support team. Better terms for established businesses.

Fundbox

  • Loan amounts: Up to $150,000
  • Term lengths: 12 or 24 weeks
  • Rates: 1.5% for every 10 days outstanding
  • Highlights: Credit lines based on unpaid invoices. Automatic repayments. No prepayment penalties.

BlueVine

  • Loan amounts: Up to $5 million
  • Term lengths: 3-12 months for lines of credit; 1-5 years for term loans
  • Rates: 4.8%-10.25% for lines of credit; 6.5%-21% for term loans
  • Highlights: Lines of credit and term loans. Fast approvals and next day funding. Dedicated business banking and payments solutions.

This table compares some key features of these top providers:

Lender Loan Amounts Terms Rates Approval Time Funding Time
Kabbage Up to $250K 3-12 months 1-1.2% monthly Minutes 1 week
OnDeck Up to $500K 3-36 months 10-80% APR Minutes 1-3 days
Fundbox Up to $150K 12-24 weeks 1.5% every 10 days Minutes Next day
BlueVine Up to $5M 3-60 months 5-21% Minutes-hours Next day

What to Look for When Comparing Business Loan Providers

Beyond the numbers, there are several other factors small business owners should consider when reviewing loan options:

Eligibility Requirements

Most online lenders have more flexible requirements than banks, but minimum qualifications still apply. This usually includes:

  • Time in business – Some require at least 6-12 months
  • Revenue/expenses – Minimum monthly or annual revenue
  • Credit score – Minimum personal/business credit score

Meeting eligibility criteria is key for approval, so review requirements carefully.

Loan Types Offered

The main online loan types are:

  • Term loans – Lump sum with fixed monthly payments over 1-5 years
  • Lines of credit – Revolving credit lines with interest paid monthly
  • Invoice financing – Loans based on unpaid invoices

Consider which option aligns best with your financing needs.

Fees and Rates

While online loans often have higher rates compared to banks, some lenders charge additional fees on top of interest payments. Common fees include:

  • Origination fees – Charged upfront for processing loan
  • Prepayment penalties – Fines for paying off loan early
  • Late fees – Charges for missing payments

Factor all costs into your decision to determine the best overall value.

Customer Support

Getting quick support when you have questions or issues is vital when taking a loan. Prioritize lenders that provide channels like:

  • Direct phone and email access
  • Online chat or messaging
  • Education resources and tools

This ensures you get timely assistance when needed.

By weighing these key factors, small business owners can find the most affordable and responsible online financing option for their situation.

Applying for an Online Small Business Loan

Once you select a lender, the application process is simple and can be completed in minutes. Here are the standard steps:

  1. Determine loan amount – Choose loan amount based on your funding needs and the lender’s offered amounts.
  2. Fill out application – Provide basic information on yourself, your business, and financial details.
  3. Review offers – If approved, you will receive loan offers to compare rates and terms.
  4. Accept offer & e-sign agreement – Select your preferred option and e-sign loan agreement.
  5. Verify identity – Provide ID verification to reduce fraud risk.
  6. Funding – Loan funds will be deposited directly into your bank account, often in 1-3 business days.

While each lender has its own process, most provide fast approvals and funding in days, rather than the weeks or months common for bank loans. This speed makes them ideal to access capital for pressing needs or new opportunities.

Using Smart Borrowing Practices

When used strategically, an online business loan can provide the financing you need to take your company to the next level. But it’s also debt that must be repaid, so responsible borrowing is essential. Here are some best practices to follow:

  • Have a clear plan for how you will invest the capital and generate returns to repay the loan. Never borrow “just because”.
  • Only borrow what you can confidently afford to pay back on schedule. Unexpected issues can still occur.
  • Compare multiple lender options to find the best rates for your situation – don’t assume one company is “the best”.
  • Read agreements carefully to understand the full costs, terms, and risks before accepting a loan.
  • Use financing as a bridge to grow your business, not to cover chronic cash flow issues. Continually re-borrowing debt can create a dangerous debt spiral.

Following these smart borrowing principles will lead to online loan success and growth for your small business.

Conclusion

Online lending has opened the door to fast, convenient financing for small business owners who may not qualify for traditional bank loans. But not all online lenders are the same. Comparing factors like loan amounts, rates, terms, fees, and customer support is crucial to identify responsible funding options tailored to your needs. Weighing these key details will lead you to an affordable loan that propels your business growth.

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Comparing options for online small business lending is well worth the time and effort. Choosing the right loan can provide key funding to take your entrepreneurial dreams to the next level. With responsible borrowing practices, an online loan can be a strategic move to grow your business.

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