When it comes to interest rates for small business loans online, you should expect to borrow for an interest rate of about twenty-five percent. This is a very high rate of interest. While different lenders may offer different rates of interest, in general, small business loans are expensive choices. To help you learn more about what these loans are, how they work and what their advantages and drawbacks are, we’ve created a practical quick guide to aid you in your search.
What are online small business loans and where can I get one?
Online small business loans differ in type. For example, you may get a normal loan via an online small business loan or access a car loan in this manner. With this type of loan, which is applied for via the internet or sometimes at your local bank you’ll need to make a predetermined amount of scheduled payments in order to pay off the loan. Credit cards which require monthly minimum payments are not classified as online small business loans. To explain how this loan works, let’s say that a borrower wants one thousand dollars in order to take care of unexpected expenses for their small business. These repairs are urgent and they must be undertaken immediately. After applying with a few companies online and being approved, the borrower will get the money and then have to pay the loan principle, plus high interest, back to the lender within two years, via installment payments.
Why choose a small business loan over other types of financing?
Small business loans are often chosen by those who want to avoid the drawbacks of payday loan or a typical bank loan. With a payday loan, the entire loan amount must be repaid by the next payday of the borrower. With a bank loan you’re going to be hard pressed to be approved for a high dollar loan because the bank will only go off your personal finances and not your business financials. With online small business loans, payments continue over the long term. This means lower payments which may be more manageable to the borrower. However, both loan types carry very high rates of interest.
What are the Pros and Cons of small business loans?
It’s often possible to get this type of loan even if your credit score and background isn’t great. As well, you’ll get funds quickly once you’re approved. These “pros” are the reason why more and more people are applying for online small business loans via a range of lenders. In terms of cons, these loans cost a lot because they have high interest rates. This is basically the only con and some people find that the convenience of getting fast money outweighs the drawbacks. Another benefit of this type of loan is that there is ample time to pay back the loan. People have lower payments, as opposed to having to pay back the entire loan amount, plus interest, over a very short time frame. Another drawback with small business loans is that you’ll need to show at least a few years of work history with positive cash flow. Most lenders have different requirements for this but it will typically be at least a year that you’ll need to show.