Why Small Business Loan Companies over Banks/Large Players?

Not too long ago, when businesses needed loans, the only option they had was to visit a local bank, fill numerous application forms and wait for weeks or even months to get it approved. Dealing with banks or big loan companies can be really frustrating, especially when you need a loan in a short span of time. If you are one of those dealing with such issues, you cannot miss looking out for various options available online. With a number of small business loan companies competing in the lending space, these businesses now have access to loan options where the funds are disbursed in just 24 hours. The main aim of these companies is to get you access to loan in an easy and quick fashion.

But the next question that comes to our mind is – how to find the best, guaranteed loan companies that provide loans with no or low fees? There are various sites online that compare various competitors in this space and review some of the best financing options available for your specific needs.

They can help you with getting a clear understanding on:

  • How to apply for loan online
  • When you can receive the business funding
  • Repayment schedule
  • Trustworthiness of the loan provider
  • Re-borrowing process, if applicable

You can make your decision of selecting an appropriate small business loan provider basis the flexibility on loan terms they are offering (the size, the repayment options and schedule), the diversity of funding options made available to you, their lending reviews and reputation in the market, quick and easy application process and user-friendliness of the whole procedure.

What is a Paycheck Protection Program?

PPP or the Paycheck Protection Program was launched to provide small businesses in the US with eight weeks of assistance through federally approved loans. As per this program, all the small businesses were covered and the loans were given at an interest rate of 1%, for a maturity period of two years. It covers expenses for businesses for 24 weeks (starting from loan disbursement date) and the businesses can repay the loan after their forgiveness application is processed or 10 months after the coverage period of 24 months. The program ensures there are no additional fees to be paid by the borrowers and that the loan is given into a non-taxable grant.

Online lenders and small business loan companies were lobbying for a long time to become authorized PPP money providers. All this while, these small online lenders used to connect a borrower to a lender and earn a fee in the process rather than lending the money directly. Finally, the hurdle was removed when the Treasury granted permission to these companies to apply for approval when Congress realized that small businesses are hurt by pandemic and they are in need of cash to run their businesses. Since Small and Medium enterprises (SMEs) play a key role in global economy growth, it was crucial to help them with quick loans for sustenance. Congress passed a law providing federal backing to companies with less than 500 employees. PayPal and Intuit became the first non-bank lenders to gain approval for disbursing the funds to borrowers.

Kabbage, a larger firm in this space, started soliciting applications from business owners seeking loan under PPP, urging them to apply on its own platform. However, American Exchange’s purchase of Kabbage left borrowers in the cold when it purchased all of Kabbage except the business responsible for PPP. The orphaned division, known as K servicing, was distanced by AmEx, which left existing Kabbage customers confused about who is accountable for their PPP loans. The whole confusion around who is managing Kabbage and PPP made customers think AmEx acquired Kabbage is constantly changing what they say about applying for PPP loans. So, yes, the customers who came for their second loan amount had to struggle with the whole Kabbage – K Servicing experience, but otherwise the Kabbage model had worked out well.

Borrowing money from the right lender is not an easy decision to be made as any wrong step in this front can lead to a messed up situation. While the concept of small lenders directly disbursing money to borrowers has helped a lot of small businesses in getting the credit faster and easier, there is always a need to look for the right players in the marketplace. Little research on who is offering what can be of great help in such times of distress. These small Fintech firms or loan companies have emerged as a brilliant alternative that can disburse loans in just 24 hours or so. They use hassle free money lending services to small businesses, unlike traditional banks or loan providers which usually take weeks to approve a loan. The key driving factor is use of latest technology which enables these firms to provide quick and convenient loan services.

So, all that is required is some amount of time devoted to reading reviews on these small lenders to find out who is the best online loan provider.

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George Meszaros is the editor and co-founder of Success Harbor where entrepreneurs learn about building successful companies. Success Harbor is dedicated to document the entrepreneurial journey through interviews, original research, and unique content. George Meszaros is also co-founder of Webene, a web design and digital marketing agency.