Online Business Loans 101: How To Find The Best Lender


Businesses of all shapes and sizes need access to money. Even a corporate giant like Apple, valued at more than $1.5 trillion, borrows money on a consistent basis. It goes without saying that global giants have easier access to borrowing cash at rock-bottom rates. But small-and-medium size businesses should have no problem finding access to cash themselves and the process isn’t that difficult.

The advancement of financial technology (fintech) companies over the past few years imply the competitive environment is as crowded as ever. But the key to selecting and working with one of the best online lenders relies in part onh understanding individual wants and needs.

Small Businesses The Heart Of The Economy

The number of small businesses in the U.S. totaled nearly 31 million at the end of 2019 and employed more than 58 million people. Each one of these businesses required access to new money at some point in its lifecycle.

Some needed it in the very early days so they could get their feet off the ground. Other more established and profitable small businesses needed a large amount of cash to help fund the purchase of a much-needed warehouse or expensive piece of equipment.

Small business owners have plenty of choices at their disposal to work with one or many online lenders that best suits their needs. But with a growing list of lenders, how does one sort through all the information to avoid wasting time with inferior companies?

Here are a few handy tips small business owners can use.

Tip #1: Ask Around

Many successful and ambitious entrepreneurs tend to associate with other leaders that share a similar view of how to approach business. Asking others how they managed to stay alive during economic downturns or expand so rapidly are common topics of conversations.

It isn’t embarrassing or taboo to ask others what online lending company they used. Chances are they may have a connection that can help speed up the application process or even offer a discounted rate.

Small business owners shouldn’t be afraid to go online and ask business-oriented communities and groups. The internet is a large place with no shortage of experts eager to offer help to random strangers with their money needs. Perhaps they feel it is their duty to help support the U.S. economy or they are merely paying it forward as a stranger helped them out in the past.

Tip #2: Familiarise Yourself With The Five Cs

The “golden rule” used by lenders to evaluate the creditworthiness of a small business owner is via the “Five Cs of Credit.” These include: character (credit history), capacity(accounting metrics like debt-to-income), capital (amount of money you have), collateral (availability of an asset to act as a security for a loan), and conditions (purpose of the loan).

Top-tier lenders understand the importance of going through this concept in detail. As a general guideline, lenders who don’t follow this process in one way or another should be avoided as they aren’t acting as a serious partner by trying to best understand how they can serve new clients.

Tip #3: Be Prepared To Answer Questions

Lenders make their profit by providing cash to businesses and people who can afford to repay them. Obviously, they aren’t in the business of handing out cash to anyone and everyone who asks. If a lender asks a simple and basic question like “how much money do you need to borrow” and your answer isn’t anything but a firm dollar amount along with a plan on how and when it can be paid back, the application could be thrown in the trash.

Always be prepared to answer all questions, regardless of how difficult it may seem. Keep in mind that it is a lender’s job to make sure they are lending cash to a business owner that can pay it back.

The excellent lenders know how to manage this process with grace and aren’t trying to trick you with “gotcha” questions. Quite the contrary, they want to establish a good working relationship with a new client that could result in repeat business.

Tip #4: Understand Your Needs

While it may seem obvious at first glance, a business owner needs to first understand their unique needs. Many online lenders specialize in many different areas and the space certainly isn’t a “one size fits all.”

Some online lenders offer short repayment terms that come with a higher regular payment amount. Others offer a longer repayment term that comes with lower monthly payments but with a catch as the total dollar amount of interest paid over the term will be higher.

It wouldn’t be unusual to find some online lenders providing a fixed-fee structure that implies early repayment won’t come at a cheaper cost. Other money lenders would be more than happy to let their borrowers pay back loans early — even at the expense of their own profit.

Bottom Line: Research And Plan Carefully

There is no such thing as the “best” online lender for entrepreneurs as terms and conditions vary greatly from lender to lender. In fact, dealing with a lender that doesn’t offer products and services that best suit your needs can result in a frustrating and negative experience.

This can be avoided by figuring out what your needs are. Of course, mistakes happen, and selecting a lender that doesn’t suit your needs happens all the time. But consider it as a learning experience for the next time you need to borrow cash.