Small business loans (also referred to as small business financing or franchise financing) are loans provided to small businesses for various purposes by a lender. These loans may have fewer requirements, allowing the small business to successfully obtain the funds. A small business loan could also provide other incentives for the borrower, which may reduce the overhead costs for the business. Small business loans usually range from $5,000 to $500,000.
A recent study conducted by the Harvard Business School pointed out that bank-backed loans available for small businesses nose-dived during the recession and have been slow to recover. Furthermore, traditional lenders lack an adequate system to underwrite small businesses, so many tend to turn to the business owner’s personal credit score as a measure of creditworthiness. For traditional lending companies, underwriting the smaller-sized loans is just not cost effective – it’s more advantageous to underwrite a $1,000,000 loan than it is a $25,000 loan – so there is little incentive for them to improve their underwriting system.
When deciding where to take out a small business loan, business owners should consider the following five factors to find the best loan to match their needs: 1.) The terms of the loan, 2.) how the lender determines creditworthiness, 3.) how fast you need funding, 4.) how much funding you need and 5.) quality of customer service
Bizfi’s automated funding platform allows small business owners to shop and compare all available financing options in real time with just one application. After applying, small business owners can view their approval amounts, term and repayment options.