Imagine you’re an entrepreneur who opened a retail storefront two years ago. Business has been fantastic when all of a sudden a prime commercial space in a nearby town opens up. It’s the perfect spot for your second location.
You study your finances and realize that you’re facing a cash crunch and don’t have the money on hand to cover the expenses associated with opening another store. After assessing your options, you realize the best way forward is to secure small business financing from an outside lender.
As you begin your search for funding, you quickly realize you have a ton of options to choose from. You do some research and find out that—to secure financing from most modern lenders or fintech companies—you need to hand over personal information and connect your bank account to their services.
This is a big request. In the age of identity theft and data breaches, you’re concerned about turning over sensitive data to third parties—and rightfully so.
Still, you’re determined to find an trustworthy financer that works hard to protect customer data while financing small businesses like yours. You just need to figure out which characteristics to weigh as you compare various lenders.
We’re here to help. Let’s take a look at five factors you need to consider as you zero in on the small business lender that works best for your company.
1. Financing details
First things first: No two lenders are exactly the same.
Before you dive into a more granular comparison, you need to make sure the financers you’re assessing offer small business financing options that work for you. Here are some factors to consider:
- Length of the application process.If you need money quickly, you can’t afford to endure an application process that requires hours of paperwork and lasts several weeks—or even months.
- Rates. How much money are you willing to spend to finance your small business?
- Amount. Some lenders are willing to lend much larger sums of money than others. On the flip side, sometimes you only want a small amount of capital, and some lenders have high minimum amounts that they will lend.
- Terms. How quickly will you be able to repay your small business loan?
- Qualifications. Is your credit score high enough to qualify for funding? Have you been in business long enough? Can you provide the information required in the loan application?
Once you’ve identified several lenders who offer financial vehicles that appeal to you, it’s time to evaluate their merits on other factors.
Has the lender you’re considering gone the extra mile to provide customers peace of mind by earning important certifications and accreditations? Do they follow industry best practice security protocols?
Over the course of your research, you may notice that some lenders and financial service providers display logos on their websites that demonstrate various certifications and associations, including:
- Better Business Bureau. Founded in 1912, the Better Business Bureau (BBB) is the leading organization focused on advancing trust in the marketplace. BBB accreditation is given to businesses that have demonstrated their willingness to resolve customer complaints in good faith and operate honestly and transparently.
- Norton. For more than 30 years, Norton has helped consumers, businesses and other organizations ensure their computers remain optimized, protected and virus-free. When you see a “Norton Secured” icon on a website, it means the website has been authenticated by Norton and that the site in question supports encrypted data transmission. The logo also indicates a website does not contain any malware and is regularly monitored for security vulnerabilities.
- McAfee. Like Norton, McAfee has been keeping computers secure and functioning properly for more than 30 years. The company offers “McAfee Secure” certifications, which verify the website doesn’t contain malware or malicious links, has a valid SSL certificate, and does not allow phishing, among other things.
3. Customer validation
Finding out what other customers are saying about the company in question can help you make the right decision. You probably don’t want to partner with a lender that has a large number of critical customer reviews.
It’s easy to find out how customers view various lenders. There are a number of customer review sites—like Trustpilot and the BBB website—that are filled with helpful information you can use to find a lender that works best for you.
You may also be able to find reviews on other sites, too. If a fintech company integrates with other companies, the partner company may publish reviews that can help you in your research. For example, since Fundbox integrates with QuickBooks accounting software by Intuit, there are a lot of reviews for Fundbox on Quickbooks’ website.
Do a quick search for the lenders you’re interested in online. If they’re worthy of your business, you should find a fair amount of reviews on a number of sites. For the most accurate assessments, look for sites that have many reviews for each firm—not just a handful.
4. News coverage
If you’ve never heard of a lender before, it may make sense to search news archives to see whether they’ve received any press coverage recently.
If they’ve never been in the news, that might mean they are brand new. Depending on your comfort level with everything else you learn about them, you may want to consider other companies that have been around a bit longer.
Transparency is a top priority for businesses today.
It’s one thing for a business to proclaim it’s transparent. It’s quite another for one to actually practice transparency.
When searching for a small business lender, consider whether they make a specific commitment to transparency. Does the lender list its address and contact information in a prominent place on its website? Or do you have to spend 10 minutes digging through the site to find a number to call? Is there even a phone number to call in the first place—and an actual human waiting on the other end to answer?
You might have found that many companies hide their contact information and make it tough for customers to get in touch with anyone. Good luck solving your problems if you can’t even find anyone to help you.
Look for lenders that not only say they value transparency but actually back up those words with actions. Leading fintech lenders tend to offer a wealth of information on their websites—anything from knowledge bases and FAQs to pricing information and customer reviews, and everything in between.
Be ready for the next opportunity
From time to time, even the most successful small businesses can benefit from having access to extra capital, and decide to tap outside lenders for financing. As a responsible owner, when you find yourself in such a situation, you can’t simply partner with the first lender you come across.
By evaluating lenders across the five categories listed above, you’ll increase the chances you end up working with the one that’s best suited to meet your specific needs. With money in the bank, you can then return your focus to what matters most: delighting your customers and jumping on the next opportunity to grow your business.