As a part of tips on how to get small business loans, the previous article has discussed how to understand different types of loans for small business. Of course, that is not the only thing you need to know before deciding to apply for a business loan. That fact that there are many types of loans for small business also implies that there are different types of lenders. Knowing them will help you make a wise decision.
How to Get Small Business Loans: Know the Lender Types
Of course, many lenders out there are willing to help you. However, not every lender is a suitable partner for you. You need one that offers lending scheme that fits your need and financial condition. The following are main types of lender you need to know:
Large Commercial Banks
At some point, bank is one of the most reputable lenders. Banks usually have lower interest rates and the credit duration may be longer. However, large banks usually have more requirements and slower process. You may need to provide collateral and have to pass credit check. Small businesses that need quick money can hardly depend upon the bank loan application process.
Local Community Banks
These banks may have slightly higher interest rates. However, local community banks offer simpler procedures, as they always want to be the partners for small business. Local banks commonly offers shorter credit period. Some of them require you to provide collateral, such as vehicles and real estate, but some do not. In addition, some local banks may require credit check.
Direct Online Lenders
They are the most welcoming partners for quick loan. Direct online lenders usually apply a relatively easy loan process. They are also supported by reputable lenders. Another advantage is that the lenders may not require you to provide collateral. Some lenders do not even check your credit record before making approval. Some lenders even offer overnight credit process. Once you send the application today, you will get the money in your account tomorrow.
The disadvantages include higher interest rates, shorter duration, and lower credit limit. Direct online lenders can be easily found on internet. Some of them have only online presence, but some are online divisions of a conventional lending agency.
Peer-to-peer lending sites
They also have online presence. However, peer-to-peer lending sites are not the true lenders. Instead, they act as the middlemen between the clients and the lenders. They offer online services to help the clients get a lender, who want to provide the necessary fund. Of course, such websites get commission from the lenders.
Bank Lenders with SBA Guarantees
They are also bank lenders, but they are backed by SBA. This way, the bank lenders can offer more attractive terms, such as easier payment method, more competitive interest rates, and simpler approval procedures.
So far, two tips on how to get small business loans have discussed, namely understanding the loan types and knowing the lender types. Make sure to learn the characteristics, advantages, and disadvantages of each lender. Of course, there are some additional tips, which may help you. Check them out.