Six guidelines for choosing the right small business loan provider
Being the new business in the town, you might face difficulty in getting a loan from the banks. Since banks have strict regulations for providing financing, small business loan providers are your best bet. By far, the most reliable way of receiving funding for your business is through alternative lenders. They can offer you a variety of small business loan options. However, with so many online lenders available, it might become challenging to choose the right one.
The following are the six guidelines for choosing the right small business loan provider.
1 – Research, check reviews and BBB ratings
It’s essential to conduct thorough research about the lender before choosing them. You may begin with speaking to your friends and family who have already worked with alternative lenders. You should also read reviews about the lender’s service on his website, Google, Yelp, etc. Also, keep in mind to check their Better Business Bureau (BBB) ratings. If the company has an ‘A’ rating, then it must be trustworthy.
2 – Know the funding options offered by the lender
An online lender can provide you with multiple small business loan options. But you need to see if the provided options are suitable for your business. Some of the common ways of funding are invoice factoring, business line of credit, and SBA loans. If you want to go for a fully debt-free option, then you may choose invoice factoring. Also, the business line of credit is great for your business to deal with cash flow problems.
3 – See if the lender is flexible enough
The number one reason why most small businesses go for alternative lenders is flexibility. Since traditional modes of financing, like banks, have stringent qualifications, small businesses often face rejections only. So, the alternative lender you choose must be flexible enough. The lender shall not demand a stellar credit, long working history, and heavy collateral, etc. And the repayment terms and rates must be reasonable as well.
4 – Pick the lender that offers adequate funding
Most banks out there approve for the loan where the least amount required is $200,000. In case you don’t need such a high amount of funding, then online lenders are right for you. They can provide you with flexibility in loan amounts too. You can choose the loan amount from anywhere between $5,000 to $200,000. If the lender can provide you with the loan amount you want, then you may select that lender.
5 – Do a comparative analysis
The significant advantage of alternative lenders is the ability to compare. You can find numerous online lenders with a simple Google search. You can visit the website of each one of them and look for small business loan options offered them. You can also compare the loan amount, terms/rates provided by various lenders. Upon comparison, you can choose the lender who is offering you the most reasonable funding option.
6 – Go for the lender who can move quickly
If you have a significant cash flow problem in your business or you want to purchase the equipment at the soonest, then you cannot afford a delay in getting the funding. Thus, you must give priority to the lender who can move the money quickly. Traditional lenders can take anywhere from one to six months for loan approval. But, alternative lenders take three days on average to make the transfer, and sometimes, it can be as quick as within 24 hours.
Those were the six guidelines for choosing the small business loan provider. The first thing you must do is check their BBB rating, and conduct background research on the company. Further, see if they can provide you with suitable small business loan options.If the terms are reasonable and they can move the money quickly, then go ahead and choose them as your loan provider.