We’ve compiled the Complete list of Alternative Lending Platforms for Entrepreneurs. Here is what we found…
Starting your own business can be an incredibly satisfying endeavor. When you finally make that leap into the entrepreneurial world, it is often because you love what you do and are looking to make an impact in your particular industry.
However, starting a business does not come without its challenges.
One of the primary obstacles for entrepreneurs is how to fund their business – especially at the beginning. Anyone who has dabbled with starting a business knows that is can take a significant investment up front.
According to a study by LegalZoom and the Ewing Marion Kauffman Foundation, “80 percent of early-stage business owners are using personal funds to finance their companies.”
At such a high percentage of entrepreneurs self-funding their new business, it can be intimidating to even think about starting your own company because, the truth is, most people don’t have the kind of money it takes to start a business on their own.
So, how does one start a business and not completely deplete their entire life savings? There are actually quite a few ways to raise capital using online loans like Kabbage, OnDeck, Lending Club, Fundera, and lines of credit.
There is also always, of course, the option of taking a loan out from a bank; however, it generally takes more time, some collateral, and a great credit score in order to receive a loan from a traditional bank whereas an online loan often has an easy application process, higher approval, and you get the funds quicker.
First, let’s define what it means to “raise capital.” Capital is the amount of money or funds that it will take to get a small business off the ground in order to begin generating its own income and pay its employees and so forth.
We’re going to explore alternate ways to raise capital for entrepreneurs in order to help you to make an informed decision when it comes to raising capital for your small business. For each capital raising option, we’ll cover how long it takes to receive the money, how to qualify, and what other entrepreneurs have said.
Kabbage is an online financial technology company. It’s based in Atlanta, Georgia and provides direct funding to entrepreneurs through an online lending platform. Kabbage is free to use and entrepreneurs don’t pay anything until they use their funds.
Small business owners can receive loans up to $250,000 and the company offers an easy to use app in order to track your funds and give you 24-hour access to the money. Kabbage can help bridge the gap between having a dream and making your dream a reality.
How To Qualify for Kabbage
Small businesses that have been in business for at least one year and have an annual revenue of at least $50,000 (or at least $4,200 per month for the last three months), along with a credit score of 560 or higher qualify for Kabbage.
Applying for Kabbage is very easy to do and requires minimal paperwork. All that’s needed is to create an online Kabbage account and provide basic information about your business (industry, years in business, and so forth).
Once your account is created, you’ll link your business bank accounts in order for Kabbage to revue the business’ revenue. After the application process is complete, Kabbage will let you know if you’ve been approved for a loan.
How To Use Kabbage
Kabbage offers three different ways to retrieve the funds when you need them. The Kabbage app is available for both iPhone and Android and allows you to withdraw funds and manage your account on the go at anytime.
The Kabbage online dashboard allows you to withdraw the funds that you need directly from your computer. The funds are instantly deposited into your account.
The Kabbage card allows you to “grow as fast you swipe” with access to your entire line of credit directly on your card.
Making Payments with Kabbage
Of course, taking money doesn’t come without the stipulation that you’ll pay it back after a certain amount of time. You can make payments with both the Kabbage app and the online dashboard.
Payments can be set up to bill a certain amount monthly or you can set up auto payment which will pay off the minimum payment for each month.
Kabbage Reviews from Fellow Entrepreneurs
There are many reviews on Kabbage’s loan services and they are all positive, for the most part. A review by Merchant Maverick states that:
“finding a lender more convenient than Kabbage would be difficult. In most cases, business owners can apply, get a decision on their rates and fees, and start drawing funds within a few minutes. That’s really fast, even for an industry that’s known for coming to quick lending decisions. The speed comes at a price, though. With fees that can reach up to 10% of your borrowing amount each month, this lender provides some of the more expensive loans you’re going to come across. And while they don’t have a prepayment penalty, some merchants don’t like that Kabbage’s loans are front-loaded, which means you might not be able to save very much money by repaying early.”
Wes Dunn, the founder of Dunn’s Attic in Florida used Kabbage to get his retail business off the ground and he said that what he likes most about Kabbage is how easy it is to apply and use the platform as well as how quickly he can retrieve funds when he needs them.
OnDeck is very similar to Kabbage and the two are often compared online. Primary differences between the two online lending platforms are the loan amount and minimum qualifications. We’ll explore those and more below.
How to Qualify for OnDeck
Similar to Kabbage, in order to qualify for OnDeck you need to have been in business for at least one year. However, OnDeck also requires that your business make at least $100,000 per year or more, and a personal credit score of 600 or higher.
Applying for a loan from OnDeck is quick and simple. Applying can be done online and only takes a few minutes. You’ll need to fill out basic personal and business information, as well as provide bank statements to show your business’ cash flow. You’ll be given an answer within minutes and, once approved, will receive your loan in two days.
How to Use and Make Payments with OnDeck
OnDeck offers a mobile app and also has an online dashboard where you can manage your account, retrieve money, etc… You can also make payments online or with the app.
OnDeck has a customer service team that is available for assistance over the phone 24/7. The loan specialists work with entrepreneurs and business owners on a daily basis and are highly qualified to answer any loan questions you might have.
Because OnDeck has a team of loan specialists that are always available to answer questions, the platform has a very personal feel to it.
An anonymous review on OnDeck’s review page says:
“Love our experience with OnDeck. Such a great company to work with and always follows through on expectations and promises. We have been approached by so many other companies for our funding needs but we have no interest in switching because the experience with them is so great. Katie our Account Manager is honestly amazing! So quick to get back to us and always helping to guide us in the right direction. Normally dealing with finance people is so hard but Katie is honestly a joy to work with. I would highly recommend OnDeck!”
If your business needs a larger loan and has been in business for at least a year with revenue of $100,000 or more, OnDeck is an excellent loan option.
3. Lending Club
Lending Club is different from more standard lending companies like OnDeck and Kabbage because it is a peer-to-peer lending company. Peer-to-peer lending is a way to offer lower rates for borrowing money while offering investors competitive returns.
LendingClub specifically was the first peer-to-peer lending company and uses technology to make the entire lending and borrowing process painless for all involved which has caused the company’s satisfaction rating to rank among the highest in the entire financial services industry.
How to Qualify for Lending Club
In order to qualify for a peer-to-peer loan through Lending Club, your business must have been around for at least one year, have at least $50,000 in annual sales, no bankruptcies, and you must own at least 20% of the business. Lending Club will also look to see if your personal credit score is at least fair or better.
Once you’ve confirmed that you qualify for Lending Club, you can begin the application process. You can apply online by answering a few questions about your business and Lending Club will give you an answer within minutes.
How does Lending Club Work?
Interested businesses can receive anywhere from $5,000 to $500,000 in loans and can have access to the money within as few as 7 days. Borrowers can use the app or the Lending Club website to access their money.
How to Make Payments
Borrowers can pay back their loan with confidence because Lending Club has low and fixed interest rates and you can easily make payments directly from your bank account. Another really nice thing about Lending Club is that there is no application, brokerage, or prepayment fees.
Lending Club Reviews
Lending Club has a slew of positive reviews with borrowers saying things like, “without LendingClub, we wouldn’t have been able to start our business two years ago.” Based on the reviews, it appears that borrowers have seen highly positive results from their experience with Lending Club. Supreme Accounting & Tax SVC said they were:
“surprised by how straight-forward the process was, and how quickly [their] loan was funded.”
Other borrowers have been impressed with Lending Club’s ability to give large loans with good rates as well as the company’s superb customer service. If you’re interested in taking out a peer-to-peer loan, Lending Club should be at the top of your list.
4. LoanBuilder by PayPal
PayPal acquired Swift Financial, which is the financial institution behind LoanBuilder, in 2017. LoanBuilder’s mission is to “help businesses get the right funding quickly by letting them design loans that fit their unique needs to get approved based on how they manage their business.” We’ll walk through how to qualify and how it works to build your own loan below.
How to Qualify for LoanBuilder
In order to qualify for a LoanBuilder loan, your company must have been in business for at least nine months and make at least $42,000 in annual revenue. LoanBuilder works with businesses in over 500 different industries in the United States.
In order to apply and check your eligibility, there is an online questionnaire that should take anywhere from five to ten minutes to complete. Alternatively, you can call LoanBuilder at 1-800-347-5626 and speak with an expert live to apply. Upon completion of the questionnaire, borrowers can begin to build their loan based on estimated loan terms and their financial needs.
Once you’ve been approved for your loan, you’ll receive a contract electronically with instructions on how to receive your money and make payments.
How to Use LoanBuilder
If you are approved for a business loan through LoanBuilder, the funds will be directly deposited into your business’s bank account and can be received in as little as one business day.
Paying Back a Loan from LoanBuilder
To pay back your LoanBuilder loan, the company automatically makes withdrawals from your business’s bank account. You’ll be able to set the day of the week the funds are taken out and how much you pay; however, LoanBuilder does not allow negotiation on the frequency of the payments.
Loan durations through LoanBuilder typically have a payoff time of anywhere from 13 weeks to 52 weeks.
Doug Wiens, owner of Orange Coast Winery, says that before LoanBuilder his company lacked the collateral for a traditional loan. With the loan from LoanBuilder, Orange Coast Winery was able to re-do their wine tasting rooms, purchase more wine bottling materials, and upgrade their kitchen.
Steve Bilenky, Owner of Bilenky Cycle Works says that LoanBuilder was exactly what his company was looking for because of how easy LoanBuilder makes it to apply, receive, and pay back the loan.
LoanBuilder takes the fussiness out of applying for a loan and paying it back. Their customer service has also had many rave reviews.
Fundbox is a fintech company that uses cutting-edge technology and data science to help create financial options for small businesses. Fundbox claims that their use of common sense and technology help small businesses to gain more control over their finances in order to succeed and grow.
Currently, Fundbox has over 70,000 customers. According to Eyal Shinar, Fundbox’s CEO, “Small businesses are the core of our economy, yet the resources available to them are limited at best. We give small businesses new financial power and guidance so they succeed.” The company that got its start in 2013, is based in San Francisco and offers two products: an invoice financing offering and a line of credit.
For our purposes, we’re only going to talk about Fundbox’s line of credit.
How to Qualify
In order to qualify for Fundbox, you must have a business checking account, at least two months of using an accounting software (like Quickbooks or similar) or at least three months of transactions using the business bank account. Additionally, the business must have a minimum of $50,000 in annual revenue and must be located in the United States or surrounding U.S. territories (Guam, American Samoa, North Mariana Islands, Puerto Rico, or U.S. Virgin Islands).
Once you’ve met Fundbox’s qualifications and apply, you’ll typically get a decision from the company within three minutes.
How to use?
After Fundbox has approved you for a credit line, your funds will be available to you immediately and you can draw from them at any time. Generally, it does take one business day for the funds to deposit into your account. Additionally, you only have to pay when you draw funds and there is no continual fee.
How to pay?
Fundbox only charges you when you draw money from them. The example the website gives is that if you draw $1,000 for 12 weeks, the fees would start at $3.88 per week. Following that example, your weekly repayment would be $87.22, and the total (including fees) at the end of the 12 weeks would be $1,046.60.
You can also choose to pay over 24 weeks, which would be fees of $3.75 per week, weekly repayment at $45.41, and a total of $1,089.90 after 24 weeks.
Additionally, if you pay early Fundbox waives all of the remaining fees.
One happy entrepreneur says that Fundbox is a:
“Good company to work with! Once your credit limit is established you can withdraw any amount up to your credit limit at any time. …I would definitely recommend these guys to any small business owners. 5/5 stars!”
Another reviewer mentioned that Fundbox’s payback tactic is a little “aggressive,” but they did still mention that the process was quite painless. According to another small business owner, Fundbox is perfect for the weeks when his business’s weekly revenue is slower than he would like. Because of Fundbox, his company never misses a beat.
LendingTree is the largest online lending marketplace in America. It connects borrowers with lenders that will fit their situation. LendingTree provides financial information and guides in order to help your business make the smartest financial decision possible.
The website breaks down all different types of loans including personal, home, auto, student, and business loans. Within each loan category, LendingTree also breaks down the different types of business loans. LendingTree believes that pursuing a loan should be part of a company’s strategic business plan and their in-depth research and review platform provides entrepreneurs with the resources needed in order to choose the best business loan.
How does LendingTree Work?
LendingTree prides itself on its ability to “get small business loans tailed to you.” The LendingTree website makes it easy to research and explore each of your loan options. First, the website asks which type of business you are – the options range anywhere from Sole Proprietor to a C-Corporation.
LendingTree then explains what a small business loan actually is and how it works followed by a step-by-step process for determining your need for a small business loan through the application and then finally the payment process.
The platform breaks down each type of business loan and touches on how long the loan term lasts, what the payment process is like, how high the interest rates are, and which business necessities each loan is geared towards. The website also offers a business loan calculator when you can plug in the loan amount, interest rate, and loan term in order to determine what your monthly payment would be.
In order to ensure that you are fully prepared when applying for your loan, LendingTree also features a borrowing calculator where you can plug in your annual revenue, monthly income, and credit score in order to determine how much you might be qualified to borrow.
If you use LendingTree’s questionnaire and checklists, you’ll go into the loan application process with the confidence to apply for the loan that is best for your company.
Other entrepreneurs love using LendingTree for their financial questions and needs because the lending process is painless and hassle-free.
The customer service at LendingTree also is something to note – they are always available for your questions, no matter the time and no matter the issue. LendingTree prides itself on being simple, easy to use, and having no credit score impact. Based on their customer reviews, they stand by that through and through.
Similar to LendingTree, Fundera gives clients knowledge and advice after diagnosing your financial situation. The company’s goal is to ensure that the financial decisions that your business is making are smart, practical, and efficient for reaching your financial and business goals.
Fundera allows you to look at a variety of options when it comes to small business loans in order for you to confidently make the best financial choice for your business’s specific needs.
How does Fundera Work?
Fundera provides small businesses with useful information and resources as it pertains to their businesses financial needs. When it comes to taking out a loan for your business, Fundera has a step-by-step online guide to help walk you through that process. The guide includes things like considering how much money you think your business needs, what the money will be used for, types of business loans, as well as your business’s capital and what you can realistically afford.
In addition to the loan help, Fundera also includes information on how to analyze your credit report and what your business needs with regards to qualifying for a small business loan.
When it comes to taking out a small business loan for your company, Fundera should be your first stop in order to understand all of the different loan nuances, terms, and payment policies in order to make the wisest choice for your small business.
What other entrepreneurs are saying about how Fundera has helped their business is an excellent way to see how Funder could be beneficial to you. Some customers are seeing savings of $15,000 a month, while others have had an increase of 130% in sales.
Many entrepreneurs on the Fundera reviews page have mentioned that Fundera made it easier to reach their financial business goals with maximum ease and efficiency.
Runners Up Online Lending Platforms
These online lending platforms didn’t quite make the cut for this article to deep dive into all of their pros and cons; however, they are definitely worth mentioning. We’re going to briefly share a few helpful facts about each of our runners up online lending platforms.
StreetSharesis a business funding option whose claim to fame is that they “put the needs of business owners first.” It is a veteran-run company, which makes it unique and the company works by the following set of high moral values.
The company offers a variety of business loans, as well as lines of credit. All that’s needed to apply for a business loan through StreetShares is the ability to prove that your business can pay back the loan – you can do this by showing documents like bank statements and tax documents. Streetshares also will take your personal credit score into consideration as well.
9. Currency Capital
Currency Capital is a hassle-free way to finance your small business. The platform offers straight-forward financing options that cater to your specific business needs. Currency Capital started out as a financial platform that specialized in financing equipment.
However, now the company has expanded into a broader financial sphere. The company features three financial aid products or services: CurrencyPay, CurrencyFinance, and CurrencyAir.
CurrencyPay is a payment solution for customers of small businesses and offers multiple checkout methods, including financing. CurrencyFinance is straight-forward financing with a streamlined application process in order to help with big purchases. CurrencyFinance is available for both business and personal needs. CurrencyAir finances aircrafts, so it’s a specific niche but good to know about nonetheless.
10. Funding Circle
Funding Circle is actually exactly what it sounds like. It’s small business owners and investors supporting each other. Funding Circle makes this possible by allowing investors to invest in successful and growing businesses through the Funding Circle online platform.
Investors can create portfolios and negotiate their returns in order to make it attractive for small business owners. On the business side, the business receives fast and easy access to money in order to grow, hire new employees, and ultimately drive the overall economy forward. It’s a win-win.
11. Smart Biz
Smart Biz offers a quick, succinct small business loan application process. Once approved for a loan through Smart Biz, the monthly payments are low and offer great interest rates. Smart Biz makes it easier for small businesses to apply for loans from banks that are more likely to say “yes” to a small business.
These loans, in turn, can be used for purchasing new equipment, increasing inventory, marketing, miscellaneous operating expenses, and even refinancing the businesses debt. The application process is so quick and easy that all it takes is five minutes through the Smart Biz online dashboard or the app. Once the application process is complete and you’ve been approved, the funds will appear in your bank account within one week.
Loan vs Line of Credit
This article is primarily pertaining to business loans; however, lines of credit are often mentioned when looking at financial options for your small business, so it’s useful to understand the difference between the two.
A loan is generally described as a lump sum of money upfront and are typically required to begin making payments on it immediately in order to pay it off in the shortest amount of time possible. A loan also typically gives all of the money upfront and then you make payments from there.
A line of credit is similar to a loan in that it provides you with money that wouldn’t be available without the loan or line of credit. With a line of credit, if your small business has been approved for a credit line of $100,000 and you only use $10,000, you only owe interest on the $10,000 that you used and not on the full amount.
In fact, there’s still an additional $90,000 at your disposal. Lines of credit are great if you need money over time, as opposed to all at once.
Perhaps the biggest difference between a loan and a line of credit is the options for payment. With a loan, you’re required to begin making payments immediately, whereas with a line of credit you can often find more flexibility when it comes to when you make payments and how much you’re paying off each month. Additionally, loans usually have much higher minimum monthly payments because they include a lot more principal in the payment. The monthly payment on a line of credit is usually less because it is mostly just the interest (and not much principal) being paid in the payment.
If your business knows the amount of money needed, then a loan can often be cheaper than a line of credit and even more efficient. However, if your company needs ongoing access to funds or a more flexible payment option then a line of credit could better serve your current business needs. Do keep in mind, however, that a line of credit often has the word “interest” associated with flexible payments.
Again, if you know how much money your business needs and have the ability to pay off the same amount each month, then a loan is likely you’re best choice.
When it comes to starting and running your own business, there are many factors to consider. One of the most important things to consider is your business’s financial situation. A business loan can be the difference between your business thriving and growing or never quite making it off the ground.
It’s important to shop around in order to find the loan that is best suited for your particular business needs. Whether you choose Kabbage, OnDeck, Lending Club, or LoanBuilder be sure to check out how the company lines up with your business needs through an online resource like Fundera.
In addition to the pros and cons of each of the online lending services, it’s also important to remember that the loan also will be different based on your company size, number of years in business, industry, and even revenue stream.
Which online lenders have you had luck with? Let us know in the comments below!