Online loans Vs traditional bank loans
In recent years, banks have been reducing the number of small business loans they give out. It has become even harder for small business loan owners to get access to bank loans. Business people have turned to small online loans for the rescue. While some people still prefer the traditional bank loans, others argue that online loans are a much better solution
Here is a detailed comparison between online loans and traditional bank loans.
How long will it take you to receive the loan?
To get your loan approved from a traditional bank, it will take you a long time compared to the online loan. You will need to visit the bank branch with the required documentation in order to apply for the traditional bank loan. You will also have to wait for a period of time before the bank considers the application. It takes a couple of weeks for your capital to come through from the bank. Online loan providers use financial technology to make the process automatic. The advanced algorithms make the approval process quick. You can access the money within just 48 hours.
How much can you borrow?
Traditional banks are better than online lenders when it comes to borrowing. If you are looking to borrow a large amount of money, you should definitely do it in a traditional bank. As long as your business will qualify for the loan, you are able to get more from traditional banks as compared to online lenders. The highest that online loan lenders can go is a maximum of six digits while you can get considerably more. You will also find it more difficult to borrow lower amounts from online banks because merchandise will cost so much more.
The loan requirements
When it comes to requirements, bank lenders are more stringent compared to online lenders. They will ask you t provide proof of business operation. The business must be operated for a couple of years, depending on the terms of the lender. This makes it quite difficult for start-ups of few businesses to secure a loan and get things started. If your business has only been running for six months, you can qualify for a loan from an online lender easily.
The loan terms
Even though it is harder to qualify for a traditional business loan from the bank, the terms are more favourable when compared to those of online lenders. Because bank lenders will only offer loans to established businesses, the risks of default are minimal. Therefore, banks offer lower interest rates and flexible repayment schedules with longer payment periods than those of online lenders.
How easy is the loan application process?
Traditional bank loans have a long application process that is always convoluted, you have to apply in person and defend your reason in front of the bank manager or board of decision-makers. Less documentation is required when applying for an online loan. online lenders can qualify your application through an online process and it takes at least a couple of minutes.