With the worldwide boom of the fintech sector, now it is easier to access financial services anywhere, and there is no exception to small business owners. Online lenders come in handy for them since one of their main challenges is to get funding for their business, and getting these resources with the traditional banking options is complicated.
The success of online lenders is due to a set of factors, like the user experience they offer, fewer requirements to access their services, and faster processing of their applications, since most of them are made online. All these have shifted people to online lenders instead of traditional banks.
According to Innovate Finance, the US and UK are fintech’s top two markets. But with the rise of online lenders, customer’s doubts arise, mainly around how much they can trust them. Especially because there are fake lenders that request a previous deposit to receive the loans, taking advantage of people’s ignorance.
If you are thinking about applying for a business loan with one of these online lenders, but you have hesitations about it, keep reading to solve some of the frequently asked questions around these financial options.
FAQs About Online Lenders Solved
Some of the main questions about online lenders are:
How long will it take to get a loan?
One of the advantages of online lenders is their speed. You can get a loan in just a few days or even minutes because they are designed to help people with emergencies and to solve problems. Although it is true that in a matter of minutes, people can get their money, you have to meet specific requirements to do so —for example, bank statements and income receipts to prove your business earnings.
Is it safe to get an online loan?
Yes, but you have to make sure that the online lender is registered at the authority in charge. Approaching only registered fintech will save you from fraudulent online lenders that want to steal money with false promises and tricky language.
Why is all the procedure done online?
One of the best assets of these lenders is the simplicity of their system; that’s why the applications and loan approvals are made online. For those who feel safer talking to a person for this matter, some online lenders offer the possibility to get in touch with a representative to solve particular issues. You can also verify the identity of the institution via P.O. Box, phone number, and the FCA approval.
How much money can my business get?
Because online lenders ask for fewer requirements, and they don’t need any guarantees, they tend to offer small amounts of money, with annual interest rates between 6% and 36%.
Remember that the rates go in accordance to the payment period and the amount you want to borrow.
Is an online lender better than a bank?
These institutions are a good option for small businesses when they need a small amount of money or when they want to start their credit history. Online lenders can ask for fewer requirements than banks.
Are online lenders the same as payday loans?
A regular confusion is how online and payday loans differ since both lend you money in a few minutes and use digital mechanisms to do so. But payday loans have some restrictions like, if you don’t pay the amount they lend you the day you have to, the institution can take the money directly from your bank account, and you get moratorium fees and overdrafts. An online lender will let you modify your monthly payments if you have any unexpected trouble.
Some Considerations About Small Business Loans
Online lenders are regulated financial institutions, so you have to be careful with your payment behavior because it can affect your credit score. Maintaining a good credit score will help you get bigger loans in the future. Follow these tips to keep your investments under control:
Use the money only for business purposes.
Before you ask for a loan, be sure of what you’ll do with the money. Once you have it, be smart! Don’t waste it on other things than your business growth. Remember that loan fees are significant, so pay what you owe as fast as possible.
Compare your options before you ask for a loan.
There are a lot of online lenders. Review at least three of them before you ask for a small business loan. To know which online lender is the right for you, check your income and how you handle your debt. Also, compare the interest rates, the time that they give you to pay, and how other clients rate the organization.
Check privacy policies.
Knowing the privacy policies and how the online lenders take care of your data will prevent you from being a victim of cyberattacks. If it is a regulated online lender, then you will have nothing to worry about.
Follow these tips and take advantage of the fintech boom! Getting a small business loan it’s simpler than you think, and in a matter of days, you could have the resources you’ve been waiting for to start or grow your entrepreneurial dreams.
Just make sure you approach a licensed and registered online lender and have a business plan for your loan. This way, this financial resource will result in a good investment.