Consumersadvocate.org has a great article that discusses the 3 types of small business lenders and then analyzes their top picks for online lenders.
SBA-Backed Loans are considered the safest type of small business loans since they are government-backed. The SBA provides a guarantee of up to 85% for loans under $150,000 and 75% for loans over $150,000. This reduces the risk for lenders and raises the borrower’s chances of getting approved for lower interest rates and longer repayment terms. These loans can be very hard to get approved.
Brick-and-Mortar Lenders generally have the lowest interest rates. They do have more strict qualifications regarding a business’ credit score, time in business, and annual revenue. The funding time is often longer.
Online Lenders offer a simpler application system. They fund the loan itself, usually with an underwriting financial institution that backs the loan. Their interest rates may be higher. Some online lenders do offer SBA-backed loans.
Read the following article: Best Small Business Loans Based on In-Depth Reviews to see consumersadvocate.org’s top 13 online lenders (after researching dozens of lenders) and the types of loans that these lenders serve:
*Line of Credit
*Accounts Receivable Financing
*Merchant Cash Advance
Once a business owner decides the type of loan that they will need, it is best to write out a business plan or loan proposal and review your credit score and history before you select lenders that you want to approach.
Consumersadvocate.org recommends that you always compare a minimum of 3 different lenders to get the best loan offer. Besides looking at the loan offer’s interest rate, look at the origination fee, factor rates, guarantee fee, underwriting fee and application fee.
This article is full of great information regarding types of lenders, types of loans and research on many online lenders that is invaluable for the small business owner!