We see many clients that previously borrowed capital from large online commercial lenders like Fundbox. The ease of the process–when it works–is a major draw for business owners. Getting funds deposited in your bank account the next day after just clicking a button sounds magical. If a business needs less than $100,000 in financing, then easy online loans position themselves as leading lenders. Here are some of the details of online term loans or invoice financing:
Speed of Approval:
- Algorithms determine your rates and funding potential is less than 5 minutes.
Speed of Funding:
- Funds are deposited in your account as quickly as the next day.
Weekly Repayments:
- Repayment terms are weekly. Every week you repay the amount you owe and the additional fees.
Credit Score:
- Online lenders like Fundbox claim that applying does not hurt your credit score, yet at the time of first funding they require a hard credit check which can affect your credit. Missing any of the weekly repayments will harm your credit.
Qualifications:
- For some lenders, typical clients have over $250,000 in revenue and have been doing business for 1+ years.
Missing a Payment:
- For a popular online lender if you have insufficient funds to make a repayment, the missed payment adds an additional week to your facility, a late fee, and a weekly repayment fee on top of the original fee owed. This repayment can total to 200% or more of the original repayment.
Cost:
- A 12 or 24 week term loan can range from a 10% APR to nearly 80%. Invoice financing with online lenders costs an equivalent of between a 10% and 69% APR.
Control:
- You concede some control over your finance with online loans. The lending company has access to your account to sweep repayments out when they are due. If you do not have enough in your account, expect hefty late fees or litigation.
Customer Service:
- Many online lenders have grown to be large companies with a customer service department. Your needs may be overlooked, or you may have to jump through hoops to reach a decision-maker.
Future Potential:
- 12 or 24 week term loans offer a fixed amount of capital that expires after that time period. There is no flexibility with the funding length. Will your business have enough capital to keep fueling expansion when the term ends?
Are online lenders like Fundbox right for your business?
There are success stories of entrepreneurs needing stronger cash flow, and an online lender approves their business for a line of credit or invoice financing. Yet, the repayment terms are unfavorable with options of 12- and 24-week facilities and mandatory weekly repayments as well as weekly fees. There are many stories of companies that cannot afford the weekly repayments and are sent to their legal team for collections.
Online lenders claim to be easy and enable growth for small businesses. Yet, the cost and repayment terms of this business funding could launch a debt cycle for the average entrepreneur. Your business cedes control over some finances and is restricted in flexibility and future funding potential.
Debt-Free Business Financing
Invoice factoring companies offer working capital management solutions similar to other online lenders. Rather than using an algorithm to determine the worth of your business, Eagle Business Credit employs underwriting professionals with decades of small business finance experience.
Is 5 minutes long enough to evaluate the funding potential of your business. The human touch to our business understands that small business owners hit bumps in the road, and we work with your company to get past those bumps. We are happy to finance small businesses with tax liens, prior bankruptcies, or stacked MCA loans because we understand that these things can happen in business.
Invoice factoring services are debt-free and do not require repayments. The money is yours and allows you the peace of mind to not worry about weekly repayments at the detriment of your cash flow. Eagle offers invoice factoring services with fees starting at 1% but typically ranging between 2% and 4%.