If you’re operating a small business, you may already be shopping around for a business loan, which means you have probably noticed how much more expensive it is to apply for a small business loan online versus a traditional bank. Before you start questioning the entire financial system, there are some straightforward reasons that online lending solutions tend to cost more:
Traditional lending solutions aren’t keen on lending money to people with low or zero credit. Banks want to deal with sure bets, not risky businesses. Ever since the 2007–08 recession, banks are more careful than ever to loan money to small business models unless they can prove that they’re not at risk of defaulting on their loans. Online lenders, however, will take more of a risk on the applicant, which makes their interest rates slightly higher. If you don’t have years of financial statements to show the bank, then it’s unlikely you’ll even qualify.
Traditional institutions receive low-interest loans from the Bank of Canada (for instance) and have access to millions of client accounts from which they use to lend out money to borrowers. Online lenders do not have access to the same amount of funds. Loans come from different sources, such as hedge funds, shareholders, and venture capital firms at a much higher rate. Since banks have access to more funds at a cheaper rate, they can charge less interest to the borrower.
One of the biggest advantages of applying for an online business loan is that you’re guaranteed the funds within 24 hours after approval. For traditional loans, the process takes longer (sometimes up to three months) because there is more red tape to go through. Because a bank is only able to approve sure bets, they analyze your finances with a fine-tooth comb, which takes time. Online lenders assume higher risk by giving their clients the benefit of the doubt; however, this efficiency increases the interest rate, a detail that many new business owners who need quick capital are happy to overlook.
Many small or new business owners seek loans from online lenders because the convenience far outweighs the disadvantages of a higher interest rate. Within minutes, applicants can apply and be approved for a business loan that can provide them with the capital they need to buy inventory, pay employees, develop products, expand services, and stay afloat. For many borrowers, online business loans have helped saved their livelihood.
If you have low credit, no credit, or are a brand-new business, we guarantee a traditional lending institution won’t lend you the capital your small or mid-sized business needs to move forward. Greenbox Capital specializes in approving loans for up to $250,000 to people in Canada, United States, and Puerto Rico. Apply today and receive approval within 3–5 business hours. Contact us today to find out how!