If you have any kind of expense you can’t immediately afford, business loans offer you a solution. They can be used for simple, one-off expenses or consistent ones. Whether it’s a new truck or just more inventory, there’s at least one kind of available business loan. This is why the best place to get a business loan is not always apparent.
There are many kinds of business loans to choose from, and there are many lenders for each kind. This can make finding the right business loan a challenge. This is why it’s important to think about what kind of loan you need before looking for the best place to get a business loan.
What Do You Need From Your Business Loans?
There are several kinds of business loans, and they all offer business owners something different. So, consider your needs and ask yourself which of the following best suits your needs:
- Business loans
- Term loans
- Equipment loans
- Lines of credit
- Installment loans
- Credit cards
- Peer-to-peer loans
- Merchant cash advances
- Invoice factoring
Keep in mind that some of these loans can be used for many purposes. For example, lines of credit can be used for large, one-off expenses. Of course, they can always be used for a collection of smaller expenses.
So, Where Can You Go For A Business Loan?
Traditional Banks
Pros
Traditional banks follow a mainstream method when it comes to business loans. They aren’t all the same, but the terms they’ll offer you are fairly predictable. You can expect the established banks to follow all the rules and not be too sneaky with their terms.
Banks are safe to work with overall. Their rates are also generally better than the ones you will find online.
Cons
Traditional banks aren’t always the best place to get a business loan. There are a few reasons for this.
First of all, traditional banks have a higher bar of entry than other lenders. This can be fine, depending on your business situation. However, small businesses that don’t meet their revenue thresholds will need not apply. Also, if your credit score and business financials aren’t looking very good, you may find it hard to find a bank that will do business with you.
Second, traditional banks can take a while. Depending on the bank you go to, the wait time can take a matter of weeks or even months. That’s not bad for most businesses, but if you need money in a pinch, you’ll have to look elsewhere.
Online Lenders
Pros
Online lenders are faster than banks at providing loans. In fact, that is the primary benefit of using them. Also, if your credit score and business financials are lower, finding a loan online will be much easier.
If your credit score is low or you’re in a rush, online lenders are a good place to look. Their requirements are lower, and they can approve you in a much faster and simpler manner than banks can.
Cons
The cons of online lenders surround their terms. Online lenders may be faster, but this comes at a cost. There are often more fees attached when using them.
The interest rates and APRs offered by online lenders are typically inferior. While lower bars of entry and speed are great benefits, you have more homework to do in assessing your risk with online lenders.
Credit Unions
Pros
Credit Unions are member-owned financial institutions. Their only “shareholders” are their members. As such, they typically offer competitive rates. Their rates are often even better than banks’. They also have the added benefit of working faster than banks do. In the end, there isn’t much that a credit union could do that a bank could do better.
If you can access loans from a credit union, you should definitely look into your options. These unions are non-profit organizations, so you can expect to be treated more altruistically than you would be elsewhere. They are also generally localized, meaning they have a bigger stake in their communities. However, that doesn’t mean they’re always the best place to get a business loan…
Cons
Like banks, credit unions are professional lending organizations. The main thing that sets them apart is that membership is limited, meaning their loans are as well. So, they carry higher bars of entry compared to other lenders. Their requirements are similar to those of banks. If you haven’t had at least a few years of profit in business, they may just turn you away.
The only other issue with credit unions is that their physical presence is usually smaller. Much of your communication with them will be online. If you’re impartial to this, you should have no problem dealing with them.
Universal Requirements For A Business Loan
Keep in mind that in any case, your financial information is critical to getting a better loan. The most important piece of information will be your credit score.
The importance of your credit score can’t be understated. For starters, you’ll have issues dealing with banks with a FICO score lower than 650.
The higher your credit score is, the pickier you can be when shopping for a business loan.
So, Where’s The Best Place To Get A Business Loan?
Keep a few things in mind when you’re looking for a business loan:
- There isn’t a “one size fits all” business loan
- You should try to keep your credit score high to have more freedom of choice
- Credit unions may be ideal to deal with, but they have high requirements
- Without access to a credit union, traditional banks are usually the most predictable to deal with
- If you need the loan quickly, you’ll have to look to online lenders
- Make sure you’re getting the best deal available to you
