As an online entrepreneur, there’s a good chance you’ve considered taking out a business loan to help fund your growth and expansion.
Seeing the tremendous potential of secure capital to manifest commercial success, thousands of ambitious online companies take on a finance facility to achieve their long-term goals. According to recent research by the British Business Bank, three in five SMEs sought external finance in the last three years, and 59% are currently using some form of funding to improve their operations (British Business Bank).
However, choosing the right type of online business loan can be challenging; with so many options available, it’s important to understand what you need from a loan, how it works, and how it will impact your business from day to day.
In this guide, we’ll be taking a closer look at the process of finding an online business loan driven at success – in both the short and the long term.
Understand your online business loan needs
When it comes to finding the right online business loan, it’s crucial to clearly understand your business plans and goals. There are many different ways of borrowing money for your business; as a director, you need to have a clear idea of your needs and your options.
Online lenders, traditional banks, or a credit agreement are some that you might consider. Each lender has different requirements, rates, fees, and repayment terms, so it’s a good idea to research and compare to find the one that suits your business best.
One critical factor to consider is the interest rate. But remember: a lower rate isn’t necessarily always the best option, if it comes with unfavourable repayment terms or fees.
Business owners also need to consider their eligibility for the different loan options available, and prepare a strong loan application. This includes drawing up a repayment plan, and providing accurate financial information. In this way, you significantly increase your chances of getting approved.
There are a lot of different finance options out there, but finding the right online business loan involves understanding your business needs, careful research, and strategic planning – which is where we can help.
Getting an online business loan: business loan variations
With a clear understanding of your needs, expectations and ongoing financial plan, it’s time to consider actually submitting the application. There are a few different options available, and each online business loan has a few distinctive characteristics, which brings us to the question: what types of small business loans are available?
- Recovery loan: A recovery loan is designed specifically to help businesses get over the damaging financial impacts of COVID-19.
- Unsecured business loan: This type of loan typically doesn’t require collateral but will include a personal guarantee to secure the facility.
- Secured business loan: In contrast, a secured business loan means using a UK property to raise the finance required.
- Asset finance: You can get help to purchase assets, such as software upgrades or production machinery, with asset finance.
- Merchant cash advance: A merchant cash advance is a loan that provides cash upfront in exchange for a percentage of future card or eCommerce sales.
- Invoice finance: This is a loan that allows businesses to borrow against their outstanding invoices. To use this facility you must be selling B2B and be selling on credit terms of 30 days+.
- Revolving credit facility: A flexible loan that allows businesses to borrow up to a set credit limit, revolving credit facility repayments can be made as and when you need to.
The role of strong credit
Online businesses often need financing to cover expenses such as inventory, equipment, or marketing efforts. If you’re looking to borrow money, it’s important to understand how your business credit history and credit score may impact your eligibility for different types of loans.
Many lenders will check your credit file and credit scores, so ensure you keep track of your credit report and work to maintain a healthy score – using a credit card eligibility checker can help you here. Assess your business’s credit rating before you make an application; it’ll be a great help in finding suitable credit card offers.
By staying on top of this and understanding your options, you can improve your chances of securing the financing you need to grow your online business.
Researching and comparing business loan providers
Once you’ve identified the type of loan that best suits your needs, it’s important to conduct thorough research to find the right lender.
You can start things off by comparing the rates and fees of different online lenders; some may offer quick approval times and same-day funding, while others may require a more detailed application and credit check process. It’s also important to check the lender’s eligibility requirements, including credit score and revenue requirements, to ensure that your online business is eligible for the loan.
At Aurora Capital, we help you compare funding and finance options, and connect with the right lender for your business needs. We work with a wide range of lenders, including traditional banks and alternative online lenders, to ensure we offer a variety of options.
Preparing the application
When preparing to apply for an online business loan, it’s crucial to create a comprehensive loan application to increase the likelihood of approval.
This includes developing a solid repayment plan that demonstrates how you intend to pay back the loan, understand the terms and conditions, and have evaluated the impact of interest rates on the total cost of the loan. It’s important to carefully review the loan terms, including the interest rate and any associated fees, to ensure that you can afford to make timely payments.
Additionally, make sure you meet the lender’s eligibility requirements, including credit score and revenue criteria, to maximise your chances of approval.
Creating a repayment plan
Developing a repayment plan is essential, and we’d strongly discourage you from taking on a facility without a clear idea of how you intend to repay the loan in a timely manner.
Establishing a repayment plan would involve calculating your monthly incomings and outgoings, and ensuring that you have the necessary funds available to make those repayments on time.
Don’t forget the T’s and C’s
When applying for an online business loan, be sure to understand the terms and conditions of the loan. This includes the interest rate, fees, repayment schedule, and any penalties for late payments or early repayment.
By carefully reviewing the loan agreement, you can make informed decisions about the loan and avoid any unexpected costs or fees. If you have any questions or concerns, don’t hesitate to reach out to your lender for clarification.
The impact of interest
Interest rates are another critical factor to consider when taking out an online business loan. It sounds obvious, but many business owners overlook the rate of interest when taking on funding, leading them to be surprised or stung later down the line.
Lower interest rate can reduce your overall borrowing costs, of course, while a higher rate can significantly increase your expenses.
Your credit score, business history, and the type of loan you choose will all affect your interest rate. It’s important to carefully evaluate different loan options and compare rates from various lenders to ensure that you’re getting the best deal; by keeping your interest rate as low as possible (without damaging the integrity of the capital), you can reduce your borrowing costs whilst maximising your profits.
Secure your online business loan today with Aurora Capital
As we’ve seen, selecting the right loan for your online business is often a productive and valuable step on the road to commercial success.
Both the number and the total value of approved business loans has risen steadily in recent times (Finder), and it’s easy to see why: secure and reliable funding can provide the financial foundation upon which to build your business’s future.
But with so much variety on offer, and so many lenders to choose from, it can be a struggle for business owners to find just the right loan. And that’s where we come in.
Our experts are here to help you navigate the complex world of finance and find the right funding solution for your business. We have access to a wide range of lenders and financial institutions, and can help you compare different options to find the best deal for your needs.
Contact us today to start your online loan application and get the funding you need to grow your business.
