When high street banks began restricting who they provide funding to after the financial crisis of the last decade, online providers became extremely popular with UK businesses. The growth of online lending continues to occur, with many large financial institutions founding small companies to offer accessible and simple funding solutions.
There are many small, but significant differences between online funding providers and those offered by the traditional high street banks. Although there is no one “best” method of funding, this will depend on your requirements, possible advantages are clear. These may include:
- Quick Payments
- Potential Lower Rates
- Bespoke Services
As previously alluded to, accessibility can be one of the main advantages to taking out a loan with an online provider. This could particularly be the case with small businesses, including startups, who may otherwise be unable to access the sorts of funds required for them to reach their full potential.
Many of the high street banks require long periods of time to assess a business’s suitability for a loan. This delay can be as long as several weeks and make the application both stressful and, on occasion, incompatible with their needs. Some online services will provide you with an answer within 24 hours of application and once accepted, payments can be efficiently processed.
Find out more about: Short term business loans
Potential Lower Rates
While lower rates are far from universal with online providers, there are some extremely cost-efficient providers offering a range of low interest rates and reduced fees when compared to traditional lenders. This will depend on a number of circumstances, including your credit rating, value of loan and term length.
Although most loans offered by traditional lenders are flexible these days, bespoke services, those tailored to suit specific industries or situations, can be much more prevalent with online providers. This may be particularly beneficial to businesses with poor credit ratings where specific providers offer funds that many UK businesses may otherwise be prohibited from acquiring. It should be noted that such loans are generally more expensive.
As with all loan methods and providers, there are inherent disadvantages with online services. While these are likely to be less problematic than you might think, it is important to know what they might be. They can include:
- Disreputable Providers
- Few Long Term or High Value Loans
- Occasional Poor Support
While the risk may be small, there are some disreputable providers out there. With a little research, however, it should be easy to negotiate around them. Disreputable providers can be easily spotted once you understand the terms and conditions of loans. Transparency is key, as is making sure you understand the risks involved before signing any contract.
Few Long Term or High Value Loans
While it is not true that only small business loans are available through online providers, larger loans can be fewer and far between than those offered by traditional funders. Online funding has maximum limits that are typically around £100,000 - £250,000, although some are higher, making them potentially suitable for most UK businesses seeking funding.
Occasional Poor Support
Support is an important aspect of a loan, as some terms and conditions can be complex and you might run into trouble meeting those terms. Most online funding providers offer support that meets the needs of their clients, but this should be something you research thoroughly as such services are not as widespread as they are with traditional lenders.
Online funding is now a competitive market, which although can be beneficial to those seeking a loan, it can make researching a suitable financier complex. Taking some time to compare providers is key to getting a transparent loan and one that meets your needs. We believe some of the most renowned providers include:
- Funding Circle
With over a billion pounds lent to UK businesses to date, Funding Circle are one of the most popular and accessible providers in the country. Investors from other UK businesses provide funding at rates that are set according to risk, meaning a variety of businesses are able to access significant funds.
Zopa offer a unique service that has few restrictive fees connected to the loan and failed applicants do not have their credit rating affected by the decision. With a loan model much like Funding Circle, there are no early repayment fees and rates are almost universally lower than those offered by traditional lenders.
Founded in 2011, Ezbob provide up to £120,000 in funds for UK businesses across a variety of sectors. Businesses can access funds as fast as in 30 minutes of application and the process takes as little as 10 minutes. Ezbob will consider all industries and sizes of business with an open mind.