If we’ve learned anything recently, it’s to embrace flexibility and be open to discovering new, game changing approaches to completing tasks that have traditionally been done the same way for as far back as we can remember. From how we work, to how we exercise, communicate, and collaborate.
In the past 15 months we’ve been redirected to complete at least one if not all of these activities virtually and online. For business owners, the same is true of both administrative and operational tasks - including securing finance.
Where banks have traditionally held the monopoly on business finance, the recent rise of the online business loan is indicative of a new market trend that’s here to stay.
If you’ve come across various lenders singing the virtues of this more modern approach to securing a loan you’ve no doubt questioned the reputation of the lenders offering them, and the trustworthiness of the actual product.
Large sums of money available to business owners with no in person contact and minimal documentation might seem too good to be true, so we’ve taken a closer look at the fine print in a deep dive analysis of online business loans.
‘Low Doc’ Loans Explained
This is a term coined by lenders when referring to online business loan application requirements. It essentially means less paperwork and a streamlined, less time consuming application process.
Depending on the lender you ultimately decide to go with, you’ll typically need the following to complete a low doc application:
- an introductory personal profile
- a business profile
- financial statements
- a business plan
- information about any collateral being put forward (for a secured loan)
Simplifying the process even more, most online lenders have the capability to connect to business accounting cloud software and access much of the necessary information this way rather than through the arduous completion of multiple forms.
It’s a more accessible method of delivering finance solutions to business owners who might otherwise be daunted by these requirements, or overwhelmed by the effort it would take to pull this information together. It’s also a tried, tested and fully encrypted process that guarantees integrity and accuracy for the benefit of both borrower and lender.
The Benefits Of Online Business Loans
A lender that designs a simplified online application process has typically designed a more flexible product to match that approach; one that better fits with the needs of the customer. The trend itself is a reflection of the evolution of the business landscape, and recognition of the changes necessary to make loans really work for business owners.
The number one requirement identified here is the need for flexibility in the terms of the loan, and thanks to their agile structure online lenders are perfectly positioned to provide this. Most offer a range of online business loans including long and short term, secure and unsecured, plus lines of credit and other alternative solutions.
Take a closer look at the terms of these loans and you’ll see that there is flexibility built into the various elements of each loan.
For example, depending on the type of loan chosen and the amount borrowed, the frequency of loan repayments can be anywhere from daily, weekly or fortnightly, to biannual or annual lump sum debits.
The length of the loan can also be sized to fit the needs of each individual business, with terms ranging from 3 months for short term loans, right up to 25 years for longer term arrangements.
If you’re a retail or restaurant business looking for cash flow to cover a shortfall in customers during the off season, a short term online business loan with a finite amount of small, regular payments could make this an option that’s accessible to you.
If your industry is manufacturing and the cash flow is required to grow the business with new equipment or premises, a long term online business loan could open the door to taking the business to new heights with flexible long term funding.
In addition, an online business loan can usually be procured unsecured, meaning with zero collateral put up front to secure it against the potential risk of missed payments and default. For business owners looking to boost cash flow and give themselves room to breathe, this means bypassing the more traditional process of using a family home or similarly large personal or business asset as a guarantee of payment.
While this can incur a higher rate of interest, it makes immediate finance a real possibility for startups and new businesses.
If you’ve been trading for less than two years, and lack access to the necessary valuable assets for a traditionally secured business loan then the flexibility of an online business loan could well work in your favour.
And if you’re a small business that needs quick, easy access to funding but has a lower credit score rating, removing the admin associated with putting forward the collateral for a secured loan is just one more way that an online business loan could be the more efficient choice.
Significant and strategic adjustments to the structure of a traditional business loan, each one reflecting online lenders’ customer-centric focus and ability to adapt to the very unique needs of individual business owners.
How To Successfully Lodge An Online Business Loan Application
Once you’re satisfied that an online business loan meets the ‘trustworthy’ criteria assigned to such an important business decision, it’s time to investigate the loan application process and position yourself for the best possible chance of a successful outcome.
With each loan application assessed on a case by case basis, the preliminary step should be an overview of any outstanding debts or payments that can feasibly be cleared in order to improve your credit score. A move that’s recommended for borrowers looking to ensure a smooth application process.
Depending on the amount and term of the desired loan a business plan may not be compulsory, but it is always a good idea for consolidating an application.
As online business loans are typically low doc, mitigating the need to track down various pieces of supporting documentation, your next move should be to make arrangements to have accounting and recent tax returns connected to the lender’s application software. A process that dramatically reduces the time and resources spent on a business loan application.
Once this prep is complete and each element of the application is in place, it’s time to submit via the completely digital process favoured by modern online lenders. This will be swiftly followed by an expedited response within 24 to 48 hours and, if successful, the transfer of funds to the business account within one business day after that.
No more waiting for weeks in limbo as a bank trawls through a lengthy application before delivering a response. Instead get ready to set yourself up for success with a flexible finance solution that fits your niche and evolving business requirements like a glove.