Online lending may be quicker, and it might be more accessible, but in many cases, it’s not what’s best for your business.
According to the Small Business Credit Survey (SBCS), 32% of small business loan applicants turned to online lenders in 2018. This number is up 8% from 2017 and 13% from 2016. When asked what the driving factors were in their decision to apply to online lenders, the top three reasons respondents gave were quick financing, likelihood of approval, and no collateral requirements.
But the unfortunate reality is the cautionary tales of predatory lending we continue to hear from multiple sources surrounding the issue, including news articles, the proposed Stop Loan Sharks Act, and the Better Business Bureau, down to our very own clients. They all tell a similar story. A need for quick cash turns into a pit of debt, from predatory loans with high minimum payments (sometimes daily) and interest rates that reach or exceed 40%, to loan scams that take the money and run. The small businesses who can survive these kinds of pitfalls are the exception, not the rule. In many cases, these borrowers end up with destroyed credit or worse, bankrupt.
A reputable lender helps you with your financial challenges. They are not there to take advantage of them. While some online lenders can be credible sources of business funding, others may egregiously capitalize on your financial need or may not be lenders at all. If you are considering using an online lender, please be sure to read the fine print, you may very well pay for it if you don’t. Take some time to consider your options and look into additional funding sources. Companies like ours may also offer a quick turnaround and no collateral for specific loan products, like our Rapid Response and Prime Lock loan programs.
In the meantime, stay safe and use our lending team as a resource to find a loan program that can best serve you and the future of your business. If one of our programs doesn’t work for you our staff will offer advice on where to go and what to do to get the financing you need.