Online business loans have revolutionized the business lending industry, providing business loans with less stringent eligibility requirements than most conventional banks would accept. Online business loans also provide fast business funding — often within 24 hours — making them a go-to option for small business owners seeking same-day funding.
While online business funding doesn’t provide in-person support through local bank branches, you will still get access to phone support and a dedicated loan specialist who will walk you through the underwriting process. Consider if an online business loan will meet your funding goals and the pros and cons of getting online business funding.
What is an online business loan?
An online business loan is business funding offered through a lender with an online platform, such as an online application and approval process. The lender is usually a financial technology company, or fintech, that doesn’t have any physical locations. The lender may use technology like AI to determine whether a potential borrower has a strong enough financial and business profile to be approved for the loan. Customer support may also be online or by phone.
By comparison, conventional business loans are offered through large and small bank lenders that have physical locations. You may have to go in person to apply, and bank lenders tend to have a lengthy application process and strict requirements to be eligible for a business loan.
Pros and cons of online business loans
Online business loans have advantages and disadvantages that you may want to consider before applying for a loan:
Pros
- Less paperwork: Online business loans tend to require less paperwork to apply for the loan. They may have an online application that takes just minutes to fill out.
- Fast funding: Most online lenders advertise that they can fund your small business loan within 12 to 24 hours.
- Lenient eligibility requirements: While conventional bank lenders want to see strong credit and revenue, online lenders tend to drop requirements to accept fair credit borrowers and startup businesses.
- Alternative lending options: Online lenders are more likely to offer non-traditional business loans like invoice financing, invoice financing, or merchant cash advances. These expand your business loan options and help you get approved for a business loan.
Cons
- Higher interest rates: Online business loans can have APRs that range from a 30 percent APR or higher, while bank lenders tend to start APRs at 7 percent to 8 percent.
- Short repayment terms: Online business funding tends to stop repayment terms at 24 months or less, though you can find lenders with more flexible terms. Short repayment terms mean you’ll pay more with each payment until you pay off the loan.
- Frequent payments: Online business loans may require you to pay off the loan daily or weekly, rather than monthly, giving you less flexibility with payments.
- No in-person support: You won’t be able to go to the bank in person to service your loan. Instead, online business lenders may connect you with a loan specialist who walks you through their funding process by phone or email.
How does an online business loan work?
Online business funding provides businesses with access to working capital, with set payments made according to the agreed-upon terms, including associated costs and fees. Online business loans will have a streamlined online application and will often allow you to prequalify for the loan. Prequalification means that you can apply without a hard check on your credit.
Online business loans also tend to have lenient eligibility requirements, giving you a higher chance of getting approved if you have poor or fair credit, low revenue or less than a year in business.
Once you get approved, the funding provider will offer you a funding agreement outlining the terms, including the total funding amount, associated costs, and the payment schedule. Once you sign the agreement, you can receive the funds in as little as 24 hours — while traditional bank financing can take a week or more to process.
How does an online business line of credit work?
An online business lines of credit typically allow you to borrow funding up to $250,000, though the maximum credit limit will depend on the lender. While this credit limit could meet many businesses’ needs, you may need to shop around to find an online business line of credit with higher limits. Pinnacle Funding offers credit limits up to $500,000 for qualified businesses.
Like most lines of credit, online business lines of credit are typically revolving. You can borrow funds up to the credit limit, repay the loan and borrow funds again as needed. As you pay back previous loans, the available credit limit replenishes, allowing you to borrow up to the credit limit again in the future.
Each withdrawal will result in a loan that you will need to repay over a set term with interest and fees. The interest is only charged on the amount you withdraw.
How to Apply for an Online Business Loan
You can apply for online business funding in a few steps:
- Determine how much funding you need.
Look at the cost of the expenses that you’re going to cover with the business loan and estimate how much funding you need. Consider additional costs, such as repairing used equipment or capital for ongoing expenses. - Look at the lender’s eligibility requirements.
Most online business loans will list the requirements to apply for the loan online, such as the time in business, credit score and annual revenue required. If you don’t quite meet one of the requirements, contact the lender to see if they will still consider your business. - Submit documents for online business funding.
Online business lenders may want to see bank statements, business tax returns and your business and personal credit reports. These documents will show the lender whether you have the ability to repay the loan. - Connect with a loan specialist.
Once you apply for the loan, a loan specialist should reach out to you to go over your loan options and walk you through the process. - Receive funding to use for purchases.
You should receive a loan decision within 24 hours. If you’re approved, you will receive the funding in your business account that you can use to fund your business purchases.
How to get a quick online business loan
Most online business loans offer quick funding, often funding within 12 to 24 hours of approving your business for the loan. If you need quick small business funding, go with a lender that advertises fast funding as part of their marketing.
You can also speed up the process by requesting a list of all documents and having those documents ready to give to the lender when you apply. You should also keep an eye out for any communications from the loan specialist and respond in a timely manner to avoid delaying the process.
Get a business loan with Pinnacle Funding
Getting a business loan with Pinnacle Funding is more than getting simple small business funding. Pinnacle Funding will provide you with a personalized approach to granting the business loan and terms that your business needs. You will work with a dedicated funding advisor to achieve your funding goals. Once you start a relationship with Pinnacle Funding, you can return to us for future financing with better terms possible.
Benefits of using Pinnacle Funding:
- Online application takes just 5 minutes
- Qualify with a soft credit check
- Funds within 24 hours of approval
- Accepts bad credit of 550 and startups with 6 months in business
- Having a previous relationship can lead to better terms