The online lending platforms utilize technology to alter the traditional way of lending and have now become an important part of the growing FinTech sector. Small-scale businesses looking for loans now can bypass their bank (which could already have told “no”) as well as obtain money through an online lender.
It sounds great, doesn’t it? It might be. The trick is to obtain the appropriate amount of capital to grow your businessat the lowest cost and within an acceptable time frame.
Bewarethat not all online lenders are in the same way. Look for lenders that offer entrepreneurs reliable financial solutions. The longer-term loans with lower rates of interest can result in the smallest monthly installments and the lowest interest rate. If you take out a costly temporary loan, then your business idea quickly turns into a financial disaster. Here are some guidelines to help you decide the best online lender that is an appropriate financial partner.
1. Take care of your house.
If you’ve taken the step to apply for funding, you must get your company’s records organized prior to beginning your process. You can do this with lenders of any kind. This advice doesn’t only pertain to paperwork. It’s also important to ensure you’re well-organized. Examine your cash flow as well as your business plan. What amount of money do you require? What kinds of repayments are feasible? A variety of low-cost and free sources are available to help determine the best option for you. Contact any nearest SCORE Office and Small Business Administration (SBA) Development Center for workshops or individual mentoring.
2. Eliminate your bad debt.
If a costly lender keeps you in debt Get out of it! It is possible to refinance costly debt and cut thousands off your budget each month by taking the long-term, low rate loan that is similar to one you ought to have taken the first time around. SBA loans generally offer the lowest APRs. Marketplaces online that provide SBA loans are able to move faster than conventional lenders. They can also assist in matching your business’s needs to the SBA-approved lender that is right for you. All of this makes them a great option to start a new beginning. Find out more on SmartBiz which is the business I created to provide more opportunities to entrepreneurs who aren’t.
3. Explore your loan provider options.
Technology is your best friend and you should be prepared to Google. It’s essential for small-business owners to do their due diligence. Examining the real value of a lender is looking past attractive websites or promises of immediate financing. You need a reputable lender that has one-digit interest rates, lengthy durations (ideally longer than 10 years) excellent customer service and online security. Scour honest reviews on sites like TrustPilot as well as Google+ or read features from trusted online magazines. Two options to consider include NerdWallet or FitSmallBusiness. Ask your potential loan provider to direct at white papers or case studies which give you a idea of the business as well as its customers.
4. Look out for teaser rates and “too-good-to-be-true” offers.
Genuine companies provide real loans that have reasonable conditions and clear conditions. Many lenders will boast rates “as as low as” however, only a few borrowers receive it. Do not fall into a “bait-and-switch. If you require capital and you’re tempted to accept an offer on the sly. It’s good to be a skeptical. Be sure that you’re receiving what you’re expecting, and do not ignore the particulars. If you don’t then, you may find the price of your loan rising.
5. Find the APR.
Unscrupulous lenders can hide their terms by using incomprehensible or misleading pricing details. Instead of clearly displaying an accurate Annual Percentage Rate (APR) they may cover up their pricing by using generally “rate,” “factor rate,” or “cost.” According to the Responsible Business Lending Coalition, a borrower’s 15-percent “factor rate” can be comparable to a 50 percent interest rate! The APR includes fees, interest rate as well as the loan’s term. Keep your eyes on the all-in-one number so that you can effectively evaluate different loan options. If a lender won’t offer the APR you requested be wary.
6. Be aware of the fees and other charges.
If your lender offers only an interest rate, but doesn’t provide other fees in a clear manner and charges, you’ll be unable to determine the APR or decide if the loan is worth the cost. In addition, you could still be responsible for origination charges charges for processing, fees to apply as well as other fees. Make sure you are aware of the amount of money that will be deposited into your bank account after the fees have been paid and then follow-up. Be sure to inquire about penalties for prepayment and make sure you read the loan documentation carefully prior to signing. Be aware that many cash advance lenders offer the possibility to refinance your advance prior to the expiration date. Do not fall for it. You’ll pay an early-payoff penalty for the initial loan and charges associated with refinancing. In combination, they can push your APR up to triple digits. Also, keep in mind that the small business loan you choose should be tailored to your specific business and help you achieve specific goals for growth. Keep searching until you discover it. Because if it seems too appealing to be true you’re probably doing a disservice to your company.