Online lenders have significantly simplified the lending process for small-to-medium businesses. Getting a small business loan through an online lender is much quicker and easier than applying through a bank or traditional lender. The criteria to qualify for a loan are also much easier to meet, with less documentation required.
Instead of basing their decision on your credit score alone, an online lender will assess the overall health of your business.
These are the main criteria they consider when deciding whether or not you qualify for a loan:
1. Time in business
Most online lenders provide loans to businesses that are already operating, however, some lenders will provide funding to a start-up or for the purchase of an existing business. Some lenders require that a borrower has been in business for at least 3 months, while others may require a minimum of 6 months in business.
2. Monthly revenue
Again, this varies according to the lender but some lenders will approve borrowers that have a minimum monthly revenue of at least $1,000. Compared to the bank, this is a very low requirement.
An online lender usually requires very little documentation, with generally no paperwork required. Most online lenders allow applicants to submit any required documents online or by linking to a read-only version of their online accounting or invoicing software. The main documents required are typically online bank statements for the business’ bank account. The majority of online business lenders don’t require businesses to put down collateral for their loan.
4. Credit score
Even though significantly less importance is placed on your credit score by online lenders, some lenders will factor it into their decision, but it is not the make-or-break factor.
If your business is healthy overall and you meet their simple criteria, an online business lender is likely to approve you for business funding. In contrast to traditional lenders, online lenders are generally known for their high approval rates.