One of the main reasons small business owners apply for loans from online lenders is speed. According to McKinsey, banks and traditional lenders typically take 3 to 5 weeks to decide whether or not to fund a small business, while the average time to funding is approximately 3 months.
In contrast, online fintech financiers generally give pre-approval in 5 minutes and can even provide funding in as little as 3 hours. The average time to funding with alternative financiers is 3 days. That’s quite a difference.
Even though online lenders are inherently fast, there are ways to speed up your business loan process even more. In this article, we’ll look at some examples and insights from Lending Express to learn how you can speed up the process for yourself.
How did this business get funds so fast?
Here’s one recent example of a business owner who succeeded in getting financing quickly. A renovation company in Miami, Florida applied for business funding through Lending Express in January this year, was approved for a line of credit from Fundbox within 15 minutes, and received their funding just three hours later. The business owner shared that he will be using his line of credit to purchase new equipment for his business.
Here are some of the things this business owner did to get funded:
- He linked his bank account to his funding application, which provided his lender with an immediate snapshot of his financial information.
- He responded quickly to communication about his application.
- The business owner signed off on his loan offer without delay.
Let’s delve deeper into how to speed up the process when you apply for a business loan:
1. Link your bank account
Instead of emailing or uploading your bank statements, when applying for funds online, you should look for an online loan marketplace or fintech financier that allows you to link your bank account directly to your loan application.
This is possible when you apply for business funding through Lending Express. This is an example of “open banking,” which is a secure way to give third-party providers or applications access to your bank data using technology. Linking your bank account is a good example of open banking, a major trend in the financial industry which will likely grow in importance in 2019.
When you apply for a business loan through a financial technology company, you will often have the option of securely linking your bank account. For example, if you decide to apply for funding with Lending Express, you can securely link your bank account through their partnership with leading open banking API, Plaid. Plaid acts as a bridge between your loan application and your bank account and is secure in the following important ways:
- Lenders on the platform get view-only access
- Data viewed by the lender is information that you would share anyway such as bank statements
- Your login details are not saved
- Data is fully encrypted
How can linking your bank account speed up your loan application?
- Data is in real-time – the lender gets the most current information about your business’s financial health.
- Immediate access – the second you link your bank account, the lender can view your business health. No administrative delay waiting for you to collect your data.
- One information source – because the lender can access everything it needs to assess your business from one source, there’s no time wasted collecting documentation from different sources.
According to Jordan Ruas, Director of Sales at Lending Express, “33 percent of our customers in the US linked their bank accounts to their loan applications,” as of January 2019.
“This results in speeding up their process and getting them more accurate loan offers,” says Ruas. “We expect this number to grow.”
2. Respond right away
There are many potential benefits of digital lending. One of them is that you’ll usually be notified as soon as you’ve unlocked a funding opportunity, so the quicker you respond and claim your offer, the quicker you’ll get your funds.
Lending Express can’t vouch for all digital lenders or platforms, but when applying for a business loan with the company, as soon as you’ve claimed your loan offer, the lender will contact you to give final approval and possibly request documentation (if needed) within 24 hours. You’ll be notified by email which lender or lenders will be calling you and also asking for documentation, where applicable.
Regardless of where you apply for funding, always be on the lookout for an email or call from your lender. Make sure to answer your phone and open their emails, so that you don’t miss any important communication about your loan application.
3. Complete your application form accurately
There are really two parts to this point:
1. Complete your loan application
2. Be accurate
If you don’t answer every required question, your funding may be delayed.
If you answer incorrectly or dishonestly, your funding may be delayed.
“A common issue we see over and over again is businesses not declaring their past judgments, liens, or bankruptcies in their loan applications,” says Ruas. “Another issue that slows down the process is when someone claims to be a business owner, but it turns out they aren’t and are applying on someone else’s behalf.”
This non-disclosure always comes back to bite applicants by delaying their application process, as lenders can find this information out anyway during the finalization of the application and during a credit check.
“Years of experience dealing with over 110,000 business owners at Lending Express has taught us that being honest in your application is the best way to speed up your business loan process,” says Ruas. “The only way to get the best loan possible is if you are completely transparent about any issues.”
Common items about which business owners applying for loans might be tempted to hide include:
- Defaults on previous loans or debts
- Any existing loans
- Low credit score or thin credit file
“If you get it right the first time,” explains Ruas, “there’ll be no going back and forth, wasting your time and the lender’s time.”
In general, transparency and communication are key. Simply by being open and specific about what you want from your lender can speed things up. The same goes for the lender or financial firm. for any relationship to work, communication needs to be a two-way street.
Even though you’re likely to get your business loan in a matter of days or even hours if you apply online, you can still speed things up even more by following these steps.
This guest article was contributed by Nici Pellimer of Lending Express.
Disclaimer: Fundbox and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. Please consult a tax professional for information about tax laws and how they apply to your business.