Alternative Online Loans
These aren’t your grandparent’s loans. Because it can difficult to qualify for bank loans, a new generation of online, alternative lenders are stepping up to get business owners capital. These lenders offer loans that are basically the same as bank loans, but the rates tend to be higher, while the credit score criteria is more lax. Typically, these loans are for 1 – 5 years and come with a fixed monthly payment. Online term loans can be used for virtually any business need.
What You Need to Know About Online Business Loans
| Pros: | Cons: |
|---|---|
| Reasonable interest rates (7 – 30%) | Higher interest rates than bank loans |
| Quick turnaround time (compared to banks) | Little or no mentorship |
| Less effort and documentation needed | May have pre-payment penalty |
| Fixed, predictable monthly payments | Usually requires good personal and business credit |
| Helps improve business credit score Available for many uses | May require collateral |
| Available for many uses | Typically, must have 2 years in business |
Best Uses for Online Loans:
- Working capital
- Purchasing inventory
- Purchasing equipment
- Refinancing
- Acquiring other businesses
Verdict:
If you’re unable to qualify for a bank loan or simply need a faster turnaround time, online lenders are a great option. Applying usually takes less than 2 hours—and you can do it from the comfort of home. The rates are a little higher than bank loans, but the convenience can’t be beat. By making timely payments, these loans can also help you build your business credit rating.