It is true that small businesses find online lenders more appealing to them than the other traditional lending institutions like banks. This has made them opt for business loans from the online lenders. This situation has all the stakeholders in the banking industry wondering. It is not that the online lenders offer extremely good interest rates compared to the banks or something of that sort. In this article, we look at some of the possible reasons which are explained below. Unlike traditional banks, online lenders have the following;
The fast and simplified application process
Traditional lenders like banks have tedious and time-consuming application processes. This is the complete opposite of the online lenders. Online lenders have designed the loan products application process such that it is fast and simple. It is so simple to a level that you can do the entire application process in a matter of minutes in some cases. The whole process has been reduced to filling an online form, uploading the required basic documents and signing the loan agreement. It couldn’t be any simpler than that. This is unlike in the traditional lenders where the process can take up to weeks.
Small businesses usually need emergency funds, and hence they opt for loans. This means for them, the time is very critical. Not only the time to wait for the funds, but also the fact that they prefer not spending too much time doing loan application which they would use it doing something useful in their businesses. This has made the small businesses opt for online lenders when they need a business loan.
Fewer requirements
Banks and other traditional lenders have some strict and many requirements when applying for a loan. They need too much paperwork to be done before your loan application is accepted. These include credit records, business records, financial records, credit status and the other legal documents. These are the requirements most small and new businesses do not have.
Online lenders, on the other hand, are less demanding on the requirements. Most of the times, they online need a business plan and the basic legal documents when you apply for a loan.
Fast approval and disbursement
Apart from the fast and very simplified application process, online lending institutions have also designed fast approval and disbursement of the loans. In this, they have beaten the traditional lending institutions hands down. Their approval and disbursement speeds can be as high as 50 times that of the traditional lenders! You can virtually apply for a loan from the online lenders and receive it within the same day. What used to take traditional banks weeks such as approval or rejection of a loan can be done by the online lenders in hours. Now, this is what small business owners want, and they cannot find it at the traditional banks. Their only option, therefore, is to go for the online lenders.
Convenience
If you need to apply for a business loan from the traditional lending institutions like banks, you have to visit their offices sometimes a couple of times, fill their forms and follow it up for a period of time, which may run up to weeks. This is very inconveniencing especially for the small businesses that don’t have that kind of time to waste.
Online lenders, on the other hand, allow you to apply for a business whenever you want and wherever you are. This is because the process is done one right from the application and even preapproval. This means you are able to get your business loan preapproved in just a few minutes. This is the convenience the small businesses look for and hence their choice of opting for online lenders when they need a business loan.
Custom loan products
Traditional lenders usually have rigid loan options, and you have to choose from the available options. Too bad for you if you don’t fit in any of the categories they provide. Most of the loan options are term loans. These do not auger well with small business owners.
Small businesses usually need small amounts of money to offset pressing bills and to regain their cash flows. They opt for online lenders because they provide loan products that better fit their financial requirements. The online lenders provide flexible short-term loans and more so in record times, which is exactly what the small businesses want.
Poor credit is likely to be accepted
Most of the small businesses don’t have good credit, or they lack the records altogether as they are mostly new businesses. This means they cannot qualify for a business loan from the traditional lenders. Online lenders, on the other hand, provide loans even to those businesses with poor credit. This has attracted the small businesses to them.
