Can my small business qualify for a loan?
Many small business owners rely on borrowed capital to start, run, and grow their business; however they often believe they don’t have good enough credit to get a loan.
Depending upon the nature of the business need, a business’ credit profile, revenue, time in business, whether or not the business has adequate collateral, and other factors, there are more options available today than ever before. And each small business lender weighs each factor differently.
The local bank has been small business’ traditional source for borrowed capital—and still remains a viable option for those businesses that can meet their potentially strict criteria. However, there are additional choices, which could make sense for your business, once you understand the landscape of potential loan options, including interest rates, loan amounts, and term lengths.
Key benefits of small business loans
Fueling Growth: Many small business owners want to grow their company, but that can require significant cash investment. A small business loan allows you to invest in your business without tying up your cash. It can allow you to finance expansion to a new location, invest in marketing campaigns, hire additional staff, and more.
Buying Equipment: When equipment necessary to the operation of your business fails, a short-term small business loan can help get operations moving again without a four-year or longer loan obligation.
Investing in renovations and other projects: There are times when ramping up a new project requires upfront costs that might exceed a business’ ability to cover with cash flow, but will be recouped in 60 or 90 days as their customer(s) pay their invoices. In that case, the ability to get in and out of the financing quickly at a lower total dollar cost could make more sense than making payments on a longer-term loan for several years.
Bridging seasonal cash flow gaps: Many seasonal businesses sometimes borrow to meet short-lived cash flow demands during lulls that exist between their busy seasons. Doing so requires the business to ensure that it has sufficient cash flow during that slow period to make the larger periodic payments often associated with a short-term loan.
Meeting unexpected challenges and opportunities: Running a small business can be full of surprises. A small business loan can ensure you don’t miss out on an opportunity just because you don’t have money on hand, or that you can handle unexpected expenses when they come up. For example, a short term small business loan could be a good opportunity for purchasing inventory at a discount that will turn quickly and allow your business to capture additional profits, or hire more employees to meet increased demand.
How to decide which loan is right for you
Small businesses have more financing options today than ever before, yet navigating the maze of loan types and lenders can make it challenging to choose the right loan and the right lender for your business. The days when the bank was the one-stop-shop for small business loans are over. Meaning, business owners need to be savvier about evaluating their loan options, including loan amount, term length, and interest rates.
Before you get a small business loan, you’ll want to ask yourself some key questions: What do I need the extra working capital for What loan amount am I looking for? What does my credit profile look like? How quickly do I need the funds?
OnDeck Term Loan
Get a one-time lump sum of cash
upfront, with the option to apply for
more when you’re halfway paid down
OnDeck Line of Credit
Get a revolving credit line,
with access to
cash when you need it
Learn More about Line of Credit
Applying for a small business loan at OnDeck is quick and simpleGet Started
Step 1. Complete the application
All of your information is kept safe and we only ask for basic information about your business and 3 months of your most recent bank statements.
Step 2. Get a decision
Your dedicated loan advisor will review small business loan options with you to find the one that best suits your needs.
Step 3. Receive your funds
Once you complete the online checkout, you can receive your funds as soon as same day.
How other small business owners have used their loans from OnDeck
Over the years, we’ve used different types of funding, like borrowing from family, credit cards, or working with banks. However, over the last few years we’ve used OnDeck exclusively, because they’ve been the easiest to work with. The application process is quick and easy. You know in a few days whether you’ve been approved, and the money comes to you when you need it.
Finnegan’s Toys & Gifts
Now it’s been three years that I’ve been with OnDeck, and unlike the banks I hear from my rep every six months or so checking in to see how we’re doing. That doesn’t really happen anywhere else. The initial process with OnDeck was so easy too. I submitted all of my paperwork. That probably took only a day to gather. They don’t ask for a huge list of documents.
If somebody was looking into OnDeck, I would probably tell them that they couldn’t go wrong. OnDeck is very easy to deal with. They take care of you, and as a small business, when you step out into the financing world, you feel like everybody wants to treat you like a huge business, and OnDeck doesn’t do that. They totally get you.
Tea by Two
Bel Air, Maryland
Types of small business loans
Unsecured Small Business Loans
An unsecured business loan is simply a loan from a lender that does not require any form of collateral from a business or a business owner. This is based solely upon the creditworthiness of the applicant.
Many small business owners are interested in a loan for their business but don’t have the specific collateral a bank may require, such as specifically-identified real estate, inventory or other hard assets. Fortunately, there are lenders like OnDeck that do not require that their loans be secured by specific collateral, relying instead on a general lien on the assets of the business. These may be good options for many businesses.
Secured Small Business Loans
Banks generally prefer secured—rather than unsecured—business loans. Secured loans are loans that are backed with some sort of collateral like real estate, equipment, or other valuable business assets the bank can seize and sell if the loan is not repaid.
Banks (or other lenders that require specific collateral) commonly determine what they refer to as the loan-to-value ratio of your collateral based upon the nature of the asset. In other words, your banker may allow you to borrow against 75 percent of the value of appraised real estate or 60 percent to 80 percent of the value of what they call ready-to-go inventory. Because lenders might consider their loan-to-value ratios differently, you’ll need to ask any potential lender how they intend to set that value.
The SBA (Small Business Administration) offers a limited number of business loans directly, typically through government-backed emergency loan programs. More often the SBA works with traditional lenders, like banks and credit unions, to offer certain business loans that are then backed by a government-guarantee. The guarantee is designed to make it easier for the bank to approve loans to business owners whose creditworthiness might fall just below the normal qualifying criteria at the bank. There are also a number of different SBA loan types intended for different business purposes.
Small Business Loans for Different Industries
As a business owner, your needs may be industry-specific such as ordering kitchen supplies upfront or bridging cash flow while you wait for insurance reimbursement. At OnDeck, we understand and we offer tailored loan options (with multiple loan types, amounts, and repayment terms), so you can get a loan best suited for your industry and business. Here are some of the most common industries we work with and the small business financing options available to them.