Why so many business owners are turning to online business loans
Traditional lenders, like banks and credit unions, collectively moved upstream to focus on bigger businesses and bigger loans. Meanwhile, for many small businesses, access to financing became nearly impossible.
As a result, online lenders are quickly going from alternative to mainstream. Here are three reasons why:
1. Higher approval rates.
Online lenders look at businesses differently than traditional lenders do, which usually leads to higher approval rates.
While banks often focus on an owner's personal credit score when they make decisions, online lenders focus on things like cash flow, business credit, and other data to evaluate the health of a business. OnDeck, for instance, consider over 2,000 data points to determine if a business is a good fit — credit score is only one of them.
"We went to our bank, and they just didn't care," says OnDeck customer Jay Fine, owner of One Call Support Services. "They treated us like we were too small and didn't want to lend money to anyone who really needed it."
2. A faster, easier process.
Nothing about getting a traditional small-business loan is quick. Traditional lenders often take weeks or even months to make a decision, and that can be problematic if you're trying to ramp up for a new contract or take advantage of a short-term opportunity to buy inventory at a discount.
The good news is that many online lenders can approve a loan application within a few hours and deliver the funds within 24 to 48 hours. Technology makes the process quick and seamless for borrowers, which saves them a significant amount of time and hassle.
3. Convenience and better customer service.
Online doesn't always mean impersonal. Many online lenders are working to mimic Amazon's model of personalized and attentive customer service.
For example, OnDeck customers receive six-day-a-week customer service support and can talk to a real person when they have questions. They can also access their accounts online to check balances or access and apply for additional funds. OnDeck's A+ rating with the Better Business Bureau demonstrates how much the company values customer service.
Richard Carillo, owner of The Mystic Florist, has been a professional florist for 30 years. "Our relationship with OnDeck is perfect for us," says Carillo. "I don't need to go into a branch office to make adjustments to my line of credit. I can do it online, it's flexible to fit my needs, and I feel like I'm in total control."
Valuing access, speed, and convenience
For business owners, time and money are incredibly valuable resources. That's why higher approval rates, a quicker, easier process, convenience, and better customer service are turning more and more borrowers to online lending as a way to finance and grow their small businesses.