Online is the new normal, even in the field of business loans. Entrepreneurs prefer applying for secured loans from the comfort of their homes or offices. Visit the lenders’ websites, choose the deal that interests you, compare different deals and apply. Seems easy, isn’t it? But along with ease, does this way provide safety? Let us find out!
Are Online Loans For Business Safe?
There are countless online loans in the market. However, not all of them are similar. While some loans are entirely safe, others pose risks for small business owners, and you should avoid them at all costs. If you find an online business loan that interests you, it is essential to do your due diligence to ensure it is legit. If you do not, you could end up as a victim of overpayment on your loan or a scam that puts your business security at risk.
What are the advantages of applying for loans from an online lender?
Applying for small business loans to the correct online lenders can transform the application and fundraising process. Some benefits of approaching an online lender are:
Lenient Eligibility Criteria
The number of documents that online lenders ask for is way lesser than what banks ask for. They readily agree to invest in start-ups and companies with an operational period of fewer than six months. The probability of a small business owner qualifying for a loan is higher here.
Fast Approval
Need cash for an emergency expense in your business? Approach an online lender to get funds quickly in your bank account. The approval and fundraising speed is fast, compared to traditional lending institutes like banks.
Multiple Options
The financial market has tons of online lenders available. So, if your application gets rejected by one, you can always look for more secured loan options. Take your time to compare all the deals and choose the most acceptable one.
How to Spot Questionable Online Loans for Business?
Keep the following red flags in mind when researching online business loans. If you find a lender showing the following red flags, you should look elsewhere for business funding.
Upfront costs
If a business lender does not have the funds they claim, they may ask to pay an upfront fee when applying for a business loan or line of credit. The fee could be thousands of dollars, based on the lender. Paying a fee increases the lender’s chances of taking your money and disappearing. Remember that reputable lenders will have nominal upfront assessment fees but never ask for thousands upfront, regardless of the type of loan you are applying for.
Approval Guarantee
When lenders offer small business loans, they take on some risk. For this reason, reputable lenders do not guarantee loan approval without verifying credit history, business sales, and other factors. Instead, they guide loan applications through the underwriting process and evaluate your referrals carefully. If a lender says they approve before submitting an application and understanding your credit history, they are more likely to be a scammer. Also, if you are applying for a business loan that lacks a complete application process, your loan options may not be as good as you think.
“Too Good” Loan Terms
If you do not have enough trading history or bad credit, it can be tricky getting a good secured loan at a low-interest rate. If you still get an incredible loan offer, never get too excited. It is possible that the lender is a scammer or has a catch, such as hidden fees or high-interest rates. You should look for a lender with a fast and efficient funding process, who advertise their total cost of the loan up front and have no hidden fees.
What to Look for in a Reputable Online Lender?
Fortunately, there are safe online lenders. They have, among other things, a thorough and fair application process and secure lending practices. In most cases, reliable business lenders share the following characteristics:
Strong encryption
Legitimate online lenders invest in the highest levels of encryption to protect your personal information. If you go to the lender’s website and notice “HTTPS” instead of “HTTP”, it signifies that their website is safe to use. If you can find a security certificate from a reputable company like Verisign on their website, you can feel safe doing business with them.
Positive reviews
Take time to read online reviews about the lender you are considering. The occasional negative reviews are not a big deal, but many of them should be a deal-breaker. Legitimate small business loan lenders have countless positive reviews, signifying that the borrower had a great experience. A positive review can give you the confidence to move forward with the application process.
Final Takeaway
Online loans for businesses are fast, flexible, and convenient, making them a great option if you need to finance your business. As long as you can find a lender without the above red flags, don’t hesitate to fill out the application. Remember to read the loan agreement’s fine print and understand all the terms before signing the dotted line.
