7 things to look for when choosing a business lender.

Jan 03 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 can be hard to know which type of loan is the right fit for your small business. Here are six things to look for (and two to avoid) when you’re evaluating business loans.

What to look for when looking at business lenders.

1. Competitive and fair pricing.

Credible finance companies will not lend your business more money than it can afford, and they will use a risk-based approach to ensure your business has access to funds at a fair price. Pricing for business loans should be upfront, clear, and easy to understand. Business loans can have a wide range of costs structures.

A good rule of thumb: you should be able to calculate the cost of your business funding with simple math. When considering and comparing business financing costs, consider how the cost of the loan is calculated, the term of the loan, as well as any additional fees.

 

2. Real people providing ongoing customer service.

The best loans 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 loan 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 options if your business decides to borrow additional funds.

 

3. A simple application process.

Online loan products typically have a streamlined application process. Often, fewer documents are required than when your business applies for a traditional bank loan. For larger business loan amounts, more documentation may be required, but most small 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 can be helpful in evaluating a potential business lender. Look for consistent, positive customer reviews, a high rating from the Better Business Bureau, and industry awards and recognition. Look for a business lender with an easy-to-find phone number and contact information. They should also have a visible ‘About Us’ section on their website with company news and frequently asked questions.

 

5. Hassle-free repayment.

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

What to avoid when looking at business lenders.

6. Commission-driven brokers.

In your search for the right business loan, you might also come across individual business loan brokers offering access to small business loans. In this case, an individual broker acts as an intermediary between a small business owner and a business lender. One thing to know about brokers: they often work on commission. Which means their motivation can sometimes be to sell small business owners the most expensive financing possible. Be aware of situations where you could be dealing with an individual broker.

 

7. Hidden fees.

Small business owners unfamiliar with business loans may not be aware of additional fees some business loans charge beyond the cost of funding.
Some loans have a laundry list of hidden financing fees that may include late fees, early repayment fees, and 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, because they can add up quickly.

Choosing the best business lender for your business.

When it comes to choosing a business lender that best fits your small business needs, make sure you know what to look for, and what to avoid.

PayPal has two loan options for your small 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.