The financial sector is changing rapidly to meet the market’s requirement and so the prerequisite of the lenders are also changing. To meet the same you will have to know their need to get approve a small business loan. The need of the lenders rises due to the rejection of small business loan by the different different bank like: hdfc business loan, sbi business loan etc. However, some banks provide the same but the loan process takes time and due to this most of the borrowers don’t want to knock the door of the bank for business loan. At this situation Online Lender plays a vital role as they promise to invest in the business and will also take good care of the same. Now, before choosing the right lender for small business loan you must have the astute ideas and for your convenience few steps are provided below which will help you to avail the loan in a competent manner. But before moving ahead, let’s know about the online lender.
Who offers online loan?
Online Loans are offered by the Community Development Financial Institution and various NGO’s and EGF also plays an active role in lending small business loan.
Smart ways to choose online lenders
1.Keep your business financial statement in a proper order
The lenders offer the flexibility in the business loan but they need strong financial records of your business so that they should get assured of the repayment. So, you will have to frame the financial track records in an efficient manner and for the same, you will have to ensure the registration of the business and tax ID number. If these two notes are featured in your small business, then you can get a good chance to interact with the certified lenders.
2. Access Accounting Software
Generally, accounting software manages your finances with accuracy and the online method help you to reach the lender more easily as the data of your small business loan is listed in the webpage and this will help the lender to know your business need and through this way, you can filter the lender more easily.
3. Distinguish business finance with individual finance
The blend of the two is not accepted in the financial market because it creates uncertainty in the mind of the lenders and they fail to know about your business revenue. Due to this you might lose the best online lender and to avoid the same you will have to keep separate accounts for your business revenue and individual revenue. Therefore it is important open a separate bank account for the small business loan. This feature will attract the lenders and will also help you to choose the one from them in a smooth way.
4. Hidden Fee
There are various online lenders who retain the hidden fee and you will get to know about the same after the approval which will result in excess payback. So, to avoid such lenders you must have the basic knowledge of the financial terms which will assist you to cut down such lenders, thereby benefiting you in choosing the appropriate ones.
5. Perform Research Analysis
This is the key factor to choose the perfect online lender for your business loan. For that you will have to go through the minute details of the lender such as an overview of the company, customer’s review and more. If you succeed in this process then you can easily get the path to reach a perfect lender. As stated in the above stanza, most of the lenders retain hidden fee and this case usually arises for a small business loan. So, you must avoid such lender and make sure to filter them out
6. Compare APR
APR denotes the repayment amount including an interest rate and fee, the merchant cash has the highest APR and the repayment tenure is daily or weekly. However, online lenders have less APR than merchant cash advances and the repayment tenure of the same is weekly or monthly. Now, you will have to choose the lender who offers the loan at low-interest rate and fee. There are some online lenders who provide a small business loan at a minimal interest rate and your job is to hunt the same.
7. Focus on Lender’s demand
Lenders use a tool to determine your business health, i.e. Debt Service Coverage Ratio and through this tool, the lenders find out the cash flow of your business. If the business debt is higher, then you may fail to get an online lender. So, you must focus on your business financial statement and make sure to clear the debt and try to come out of the red corner.
8.Get Expert Advice
There are various online experts who provide assistance to choose the online lenders. They have in-depth knowledge in this field and they know the need and demand of the lenders. If you find difficulty in taking decisions on your own, consulting them will make your task easier.
9. Verify the Lenders
Before going for the research process in choosing the online lenders, make sure to include the verification process in this method. This includes checking the physical address of the firm, website security and more. Once you are satisfied with the verification process you can move ahead.
What are the risks in Online Lending Process?
As described, the above stated points are the best ways to find out the online lenders for a small business loan. However as everything has it’s pros and cons associated with them, one more thing you should know while choosing the online lender, is it’s Risk factor. As stated earlier, the repayment tenure is very shorter and failure of the same might cause you trouble and it can also damage your business too. Therefore it is advised to pay back the loan amount on time failure to which will result in legal action against you. Most of the online lenders offer the loan at higher APR and your task is to find out the one who provides the small business loan at low APR which will guide you to pay less against the loan amount.