Access to capital is key to any business expansion. And without sufficient funding, growing a company from the ground up is impossible. Fortunately, there are plenty of options available for small and medium enterprises looking to get a loan.
The two options that are available today include traditional banks and online lending marketplaces.
And while banks have an established reputation when it comes to extending substantial capital to any start-up, the requirements are stricter and the success rate is significantly lower if the borrower does not have an established credit history.
That’s why in this article we will take a closer look at online lending marketplaces and the most common business loan products offered by these platforms.
Why borrow from an online lending marketplace?
Online lenders are gaining popularity because of the many benefits they offer. For instance, online lenders extend loan options that traditional banks don’t have.
They are also more accommodating to applicants with little to no business credit history. Of course, the terms of the loan as well as the loan amount will vary depending on the borrower’s creditworthiness.
5 best business loan products from online lenders
When it comes to applying for a specific type of business loan, it is always recommended to assess the needs of the company as well as the purpose of the funds.
Knowing your current financial standing helps in making sure that you get approved for the most suitable product with the best terms. With that said, here are five of the best, and most popular business loan products offered by online lenders.
- Business line of credit. A line of credit is always an excellent choice when you are planning to expand your business. It allows you to access a set credit line for everyday operational expenses.
Similar to an ordinary consumer credit card, you get charged interest only on the amount used.
- Equipment financing. Every business needs equipment, whether it is vehicles or machines used for production. The good thing about this type of loan is that the equipment becomes the loan collateral.
- Invoice financing. If your business receives invoices from customers, you can use these invoices to access cash and prevent payment cycles from affecting your cash flow.
This loan type takes little time to get processed and some lenders will approve your application without requiring too much paperwork.
- SBA loan. While SBA does not directly fund loans, they act as a guarantee for lenders in extending loans to businesses. This type of loan typically has lower interest rates.
However, applicants also need good credit and excellent financial standing to get approved.
- Traditional term loan. A term loan is the most conventional kind of loan product available for businesses. The lender gives you a lump sum in cash that you will repay over a set period.
Term loans can give you access to a significant amount of cash which is best used when you are starting or expanding your business.
Keep in mind that you are by no means limited by these five options when applying for a business loan. Depending on the lender, there are plenty of other products you can choose that will best suit the purpose of why you applied for funding.