7 things to look for when comparing business lenders.

May 31 2019 | PayPal editorial staff

Gone are the days when there was only one place to turn for a business loan, your brick and mortar bank where you held your business checking account. Now, new online lending options have cropped up that use technology to speed up the application and underwriting process to provide business funding much faster.

With so many business loans in the market, it's hard to know which type of financing is the right fit for your business. Here are five things to look for (and two to avoid) when you're evaluating business loans and comparing business lenders.

What to look for when comparing business lenders.

1. Competitive and fair pricing.

Pricing for business loans should be upfront, clear, and easy to understand. Credible finance companies will not lend your business more money than you can afford, and they will use a risk-based approach to ensure your business has access to funding at a fair price. Business loans can have a wide range of cost structures, so make sure to compare finance options from multiple lenders.

A good rule of thumb: You can usually calculate the total cost of your business funding with simple math. When comparing lending costs, consider how the lender calculates the cost of the loan, the term of the loan, as well as any additional fees.

2. Real people providing ongoing customer service.

Good business loan lenders use technology to make the loan application process easier and faster. But the best loan companies also provide access to real people to answer questions and help your business through the lending process every step of the way. After your business has secured a loan, it should be easy to access account information and get answers to your questions online or by contacting customer service. Don't forget to ask about your financing options if your business decides to borrow additional funds.

3. A simple application process.

Online lenders typically have a streamlined loan application process. Often, an online lender will require fewer documents than traditional bank loans. For larger business loan amounts, more paperwork may be required, but most business lenders start with your recent business bank statements or sales history to determine how much your business might be eligible for. By simplifying the application process, these business lenders can get you an answer faster while often reducing the number of hoops your business is required to jump through.

4. Reputation and customer reviews.

Customer satisfaction is a helpful way to evaluate a potential business lender. Look for consistent, positive customer reviews, a high rating from the Better Business Bureau, and industry awards and recognition. It's a good idea to seek out a business lender that has an easy-to-find phone number and contact information. It should also have a visible 'About Us' section on its website with company news and frequently asked questions.

5. Hassle-free payment.

Depending on the type of business financing you secure, payments might be made on a daily, weekly, or monthly basis. Make sure you understand your payment schedule upfront as well as the lending term (the length of time you will be making payments). The best lenders make repayment simple for you, so look for automated payments made directly from your account.

What to avoid when comparing business lenders.

1. Commission-driven lending brokers.

In your search for business financing, you might come across individual business loan brokers offering access to business loans. In this case, an individual broker acts as an intermediary between you and a business lender. One thing to know about brokers: They often work on commission. This means they may be incentivized to sell you the most expensive financing options. Keep this in mind if you decide to go through an individual lending broker.

2. Hidden fees.

Some loans have a laundry list of hidden financing fees beyond the cost of funding. You'll want to know these fees upfront so you're not surprised later on. As you compare your financing options, watch out for the following lending fees:

  • Late fees

  • Early repayment fees

  • Processing fees

Whether these fees are one-time or ongoing, make sure you're fully aware of the different kinds of fees and how much each costs before you secure a business loan – they can add up quickly.

Choosing the best business lender for your business loan.

When it comes to choosing a business lender that best fits your business needs, make sure you know what to look for, and what to avoid. PayPal has two financing options for your business.* Both business loan options give your business fast access to cash at a competitive price.
The contents of this site are provided for informational purposes only and are solely our opinions.   The information in this article does not constitute legal, financial, business or investment advice of any kind and is not a substitute for any professional advice. You should always obtain independent, professional accounting, financial, and legal advice before making any business decision. 

*The lender for PayPal Business Loan and PayPal Working Capital is WebBank, Member FDIC.