Online technology has transformed just about everything in our daily lives. We can order food, check weather, trade stocks, book flights, pay bills, and purchase just about anything from our computers and mobile devices. Small business owners like you are also reaping the benefits of online technology.
Information can be stored in the cloud, customers can learn about products and services virtually, and remote workers can be empowered to work seamlessly from anywhere in the United States. When it comes to obtaining a loan for your company, online technology makes it more convenient and efficient than ever before. This Balboa Capital blog explains how online business loans work.
History of online lending.
The birth of online lending dates back to the mid-1980s, when a mortgage company in Detroit launched the first online application and review process. Then, as the 1990s ended, banks began offering online banking services and mortgage loans. They incorporated many of the same online security technologies that the online stock trading websites were using. Online business lending began disrupting the market in 2005. That was the year when a number of alternative lending companies launched.
These companies offered business owners a way to obtain funding without the complicated and time-consuming processes that were commonly associated with traditional bank loans. Today, online business lending is chipping away at the market share of brick-and-mortar banks and credit unions. Research from a leading business news website reveals that 38% of business owners applied for an online business loan last year. That is up from 20% just three years ago.
Skip the drive, paperwork, and lengthy wait times.
It sounds incredible, but it is true. You can get a business loan without having to leave your home or office. Moreover, collateral and financial documents might not be required depending on the lender you choose, and the amount you want to borrow.
Just think, instead of driving to the bank to meet with a loan advisor and fill out paperwork, you can simply log online and submit a loan application at a time that works around your busy schedule. Most online applications can be completed in under 10 minutes, and pre-approval decisions are made quickly based on soft credit inquiries.
Soft credit inquiries.
Because a soft credit inquiry does not affect your credit score, you can shop online for a loan with the lowest interest rate and keep track of the offers you have. That said, make sure the online lenders you are considering will only conduct a soft credit pull, and not a hard credit inquiry. If you cannot find this information on a lender’s website, call them and ask, and get the answer in writing.
If a hard inquiry is part of a lender’s decision-making process, it will appear on your credit report. A single hard credit inquiry can impact your credit score, and several hard inquiries in a short period of time is a red flag for lenders.
Fast access to cash.
Online technology has increased consumer expectations like never before. In today’s world, speed is king. We have a wealth of information readily available at our fingertips, and we expect convenient buying options, fast turnaround times, and speedy shipping. Small business owners also share the same time-sensitive demands of consumers, particularly when it comes to the small business loan process.
As mentioned earlier, online loans change the game with their increased convenience and efficiency. This adds up to faster loan turnaround times, which is welcome news if you need cash to make an important purchase, stock up on inventory, pay your bills or suppliers, or kick-start the launch of a new product or service. Having access to fast cash allows you to meet your company’s obligations right away, and react quickly to changes in market and consumer behavior.
Choosing an online lender.
There are many direct lenders and financial technology (fintech) companies that offer online loans, and some of their names might not be familiar to you. Picking the right one for your company can seem like a daunting task, but it does not have to be. Once you have narrowed down your list of favorites, look them up on the Better Business Bureau (BBB) website. Then conduct a quick online search to see if they have any customer reviews. You can also check with local and state government agencies to find out if a lender is registered and has a business license number.