Today, online lending is making things simpler for startup owners to get commercial funding in a safe and secure manner. We know that peer-to-peer lending options help entrepreneurs secure business loans from private lenders. The online lending model works in the same way but instead of lending to borrowers, it helps in funding small to medium-sized enterprises. Again, there are groups of lenders that lend money to small organizations. The trend is popular now and will grow in the days to come. Did you know that Fintech companies have become one of the popular lending options, of late? It ranks only second to traditional lending systems of the banks.
Small business owners and entrepreneurs find online lending firms more approachable when looking for commercial funding. There are numerous reasons to shop for online lenders than traditional institutions.
According to an article published on https://www.huffpost.com, online lending firms are reinforced with many conventional underwriting as well as up-to-the-minute proprietary data science technology. It has helped modern lenders to provide working capital to small businesses and startups to start their operations as usual. These online lending firms are not like traditional banks but operate in the same way, and sufficiently funded by investors and businesses.
Therefore, to learn more about what lies ahead, here are five reasons why business lending is widespread now and growing popular by the day.
1. Online lenders take less time to process loan applications
Conventional banks in the country need loads of documentation and paperwork before considering a commercial loan application from entrepreneurs. Based on the findings of Chron News, the application process of traditional banks usually takes at least two to three months. Therefore, small business owners looking for immediate funding from traditional banking systems will require planning at least three months in advance. It means that startups should have enough time on hand to secure the funding.
On the contrary, online lending institutions will process the application and fund any startup in not more than seven days. As far as online lenders are concerned, there is less red tape and nepotism that make the loan approval process easy, less time-consuming, and hassle-free. To be candid, lenders online are more responsive than conventional banks when it comes to commercial funding.
There are numerous online lending firms, which provide short-term business loans and even approve an unsecured line of credit in less than a day with no mountains of paperwork required.
2. Online lenders even offer small loans
As far as traditional banks or lenders are concerned, they usually approve loan applications of a fairly higher amount. That is because these banks invest several man-hoursin approving your application. Next, there is a detailed and meticulous underwriting procedure and the servicing for the tenure of the loan. Though the minimum loan amount may differ from one institution to the other, conventional banks will require a business loan to be at least $250,000 or more.
Online lenders, on the contrary, have a more streamlined lending process than banks that helps them receive fair returns even with small-value loans. Did you know that a couple of lenders online provide loans of $1,000 as well? There are many businesses requiring not more $5,000 to fund their operations. The entrepreneurs looking to secure small-value loans must opt for online lenders. You can learn more about small business loans andthe funding process on platforms like www.libertylending.com .
3. Online lenders have flexible business lending options
The loan terms, rates of interest, and other conditions are extremely stringent when it comes to traditional banking systems. Therefore, business owners opting for loans have little control because it is the bank, whichholds most of the cards. Be it maturity dates, loan interest rates, and monthly payment schedules, these banks have their last say.
When it comes to online lending agencies, entrepreneurs seeking loans can request the lender depending on the financial standing of their business. Even if the business owner may not have much say on the rates of interest, the lender may entertain a request for a particular loan for a period of four years or five years.
The lender may also approve high monthly payments during the peak season and less monthly payments during the off-season. It is applicable for entrepreneurs engaged in some seasonal business like Halloween retailer, lawn care business, and professional event organizer. Thus, lenders have flexible lending terms and offer customized loans.
4. Onlinelenders are fine with average credit rating
Conventional banks and financial institutions are averse to taking risks. They require loads of paperwork and proof to show that the business owner has the ability to repay the loan. That is the reason why these banks focus on credit history, credit rating, and past payment performance of business owners. Even if a bank approves a loan application of a startup owner with a poor or average credit score, the rate of interest will be exorbitantly high as a penalty for the low score. And that too, if a commercial loan application is approved at all by a bank. Based on the findings of Nerd Wallet, traditional lenders like to see a credit rating of 680 or more.
However, lenders online are not reluctant to take risks even if a small business owner has a less than average credit. These online lending firms are focused on addressing the issues surrounding a poor score. Then, entrepreneurs looking for business funding will need to pay a high interest to balance the risk associated with the loan. Then, the startup owner can qualify for the loan from the lender online.
5. Online lenders ideal for funding startups
Starting a small business is not easy. In the same, lenders have to weigh the pros and cons when funding a startupbut have flexible funding options. Many startup owners approach banks directly only to realize their loan application has been rejected outright. The reasons are obvious such as longlead-time, stringent rules and regulations, and high-interest payments.
For all these reasons, online lenders are the best option for startup ventures. The loan approval process is easy even if the business has not been operating for a long time.
Conclusion
Business lending is easy and hassle-free with small loan value, flexible credit terms, and customized loan terms.