What are online business loans?

If you are a small or medium sized enterprise (SME) looking for short-term unsecured borrowing, you may use the internet to make an application for a business loan.

The entire procedure, from initial enquiry, through the formal application, the transfer of the requested funds and the management of your borrowing agreement entirely online.

How long does an application take?

Online business loans have one overriding advantage over alternative sources of unsecured short-term business loans – quite simply, they offer a streamlined service that minimises the time between your initial enquiry and the transfer of the requested funds:

  • following your initial enquiry and a brief outline of your requirements, you may receive a decision in principle almost immediately;
  • after consideration of your formal application, the lender may decide to approve the loan and, in that event, transfers the funds by electronic transfer directly to your company bank account within a couple of days or so.

What’s the alternative?

The traditional alternative, of course, is to apply to your local high street bank – once the obvious choice for local businesses in search of loans.

That request is likely to be met with a demand for the business case to be presented, a detailed cashflow presentation, your company accounts for the past year or so, and – depending on the amount requested and the period of the loan – company assets pledged as security for the loan.

Assembling that supporting information is obviously likely to take some time, the bank itself may take several weeks to consider its merits and, at the end of the day, you may suffer the same fate as many other SMEs – especially since the financial crisis of 2008 – of having your application rejected.

In other words, the alternative is likely to take considerably longer and involve more valuable time and effort than the typical course of applying for an online business loan.

Does an online lender still need to make a credit check?

Regulation of lending and the provision of credit facilities by the Financial Conduct Authority (FCA) oblige any responsible lender to ensure that adequate credit and affordability checks are made with respect to any borrower.

This is as true of online business loans as any other type of borrowing. If you are applying online, however, the lender’s streamlined processing software, coupled with the speed of the internet, means that the process is invariably much faster.

Typically, therefore, once you have made your initial online enquiry and outlined the borrowing you require, a decision in principle is likely to be sent back to you more or less by return.

This is followed by the lender’s consideration of your formal application – during which the necessary credit checks may be made – and, in the event of a favourable decision, the requested funds are transferred directly to your bank account within 48 hours or so.

How much can I borrow?

Online business loans may be available for up to £100,000 – depending on the particular lender.

For this type of unsecured, fixed-rate, short-term loan, however, the majority of businesses are likely to satisfy their requirements by borrowing £50,000 or less, repayable in equal monthly instalments of 12 months or less.

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