According to the SBA, business owners borrow $600 billion each year. Advancements in technology and the 2008 Recession causing large banks to extend less capital to entrepreneurs has led to a rise in the market share of online lenders. These online loans are positioned as quick and easy for business owners to receive funding. Whether it’s a term loan or line of credit, online lenders have stepped up to offer them when traditional banks deny a loan applicant. Algorithms performing the underwriting process means faster decisions on the amount of capital and the associated interest rate. The speed of funding and the ease of the process are major appeals for online loans. Is an online loan right for your business?
Small Business Loans
Over half of entrepreneurs applied for $100,000 or less in business funding. The average business loan from a large or small bank is well over $100,000, but alternative lenders—including online loans—averaged around $80,000 in extended capital. Thus, an alternative lender makes sense for small business working capital financing.
Online Small Business Loans
Online loans typically offer less capital than bank loans and with higher interest rates. Yet they require less time and paperwork for approval than a traditional bank. The application process is faster than a traditional bank loan, yet online loan providers typically require one to two years in business, cash flow statements, and other paperwork that may take time to gather. Some online lenders require direct access to your bank account to monitor cash flow transactions, growth, and losses. Additionally, some loans require repayments to be taken daily or weekly from your account. Missing a repayment could mean losing access to your account.
Alternative Small Business Financing
Much like an online loan, invoice factoring is fast and easy to set up. Approvals can be between 1 and 3 business days, and entrepreneurs can receive funding the same day as invoice submission. Online loans boast an average approval of 75%, but this approval can be limited on the amount of funding available. Here is where invoice factoring thrives. The amount of funding available is reliant on your volume of sales. This means the chances of a financing shortfall are thin. Instead, entrepreneurs have the immediate working capital to expand their operations.
Small Business Invoice Financing
Invoice factoring companies like Eagle Business Credit do not require direct access to your bank account. Instead, entrepreneurs with strong customers and strong products submit their open invoices for immediate payment. This bridges the gap in working capital during the cash flow cycle. More money in for your business means more credit can be extended for more sales. Invoice financing solutions enable business growth and eliminate the costly time it takes applying for business loans that may inevitably result in a financing shortfall.
Invoice Factoring Is:
- Able to support business growth
- Reliant on the quality of your business not the time in business
- Not focused on personal or business credit
- Comprehensive in financing amount
Invoice Financing Versus Online Business Loans
So which financing method is right for your business? At Eagle Business Credit we recognize that every business is unique and requires a customized solution to their business funding needs. When making financing rate and amount decisions, we have a team of industry professionals with over a hundred years of experience. This team allows for the human touch that understands the challenges of entrepreneurship and the failures that may come with small business ownership. There is no challenge too big or too small that we cannot overcome. When an algorithm decides your business does not deserve the full amount of financing sought, consider an invoice factoring facility instead.