loan for online business 

Loan for Online Business: how to get funding for your online business.

Crystal Business funding provides business loans for online businesses. Apply Now for quick and easy working capital for your    online business.

Whether you’re expanding your online business, or need to pay bills you’re going to need access to working capital to keep scaling your business successfully.

Did you know; 

There are over 13 million e-commerce sites in the U.S.

There are over 3 million websites currently using WooCommerce, (a WordPress plugin). And 5.6 million merchants on Shopify.

So where do all these online businesses get business loans from?

Why a Loan for Your Online Business can help you

• Operations:

Depending on what type of online business you have, funding can always be used to expand & hire more staff.

• Marketing:

You can use funding to Increase your revenue with  advertising, SEO, or sponsorships.

• Working capital: 

Working capital is the number one reason for businesses restructuring. Working capital is very important for any business. When having working capital available you'll be able to pay bills and expenses on time. 

But how do you find the right business loan for your online business? Here are the most popular & easiest financing solutions available.

1. Merchant Cash Advance (MCA)

MCAs are a great financing option for online businesses, especially for businesses that receive payments in credit card sales. The way an MCA works, a lender will give you a loan (based on how much revenue your business generates) and will have a fixed total payback.

Benefits of MCAs:

• Fast:

Funding can take as quickly as 24 hours from when you apply for the loan .

• Easy:

Unlike banks, MCA lenders don't require many documents, making it a really easy solution.

Interest Rates: 

Instead of an “APR” on the loans, MCA providers charge a “factor rate”, which usually ranges from 1.2 to 1.4, here's an example, if you borrow $100,000 with a factor rate of 1.2, you’ll repay $120,000. Even though the interest rates may be higher than bank loans, because of how easy and quick the process is, it makes MCAs an attractive option for many online businesses.

Benefits of Online Lenders:

• Speed: Most online lenders will have you approved for funding  within 24 to 72 hours.

• Less requirements: Online lenders can cater to businesses with lower credit scores or newer businesses. Many financial institutions have requirements such as a credit score above 720 or being in business for 5 years, while online lenders will require being open for 1 year and a credit score above 550.

Interest Rates: Interest rates for online business loans can vary widely depending on the lender. On average, rates range from 15% to 30%.

3. Bank Loans

Traditional bank loans are another option for online businesses, although they are more challenging to obtain. Banks typically require a good credit score, collateral, and a business plan. However, for those who qualify, and don't mind waiting the long application process, bank loans can be a good option.

Benefits of Bank Loans:

• Lower Rates: Bank loans come with lower interest rates, usually ranging from 6% to 11%.

• Longer Terms: Terms typically range from 10 to 25 years, depending on the loan type.

Challenges: The application process for traditional bank loans takes a while. Banks require many documents and several weeks if not months for an approval. Additionally, many online businesses do not meet the lending criteria set by banks.

4. SBA Loans

SBA loans can be a good option for online businesses. While SBA loans are technically provided by banks and other approved lenders, the SBA guarantees a portion of the loan, reducing the risk for lenders and often resulting in better loan terms for borrowers.

Key Benefits of SBA Loans:

• Lower Interest Rates: SBA loans offer competitive rates, generally ranging from 5% to 10%.

• Longer Terms: Terms are between 10 - 25 years, depending on the loan type.

• Support for Various Needs: SBA loans can be used for working capital, equipment purchases, or real estate.

Challenges: Similar to bank loans, SBA loans have many requirements, and funding can take several weeks.

Average Interest Rates

Here’s a quick comparison of the average interest rates for different types of loans:

• MCAs: Factor rates of 1.2 to 1.5, but the average is usually around 1.3.

• Online Lenders: Interest rates range from 15% to 30%.

• Traditional Bank Loans: Interest rates range from 6% to 11%.

• SBA Loans: Interest rates range from 5% to 10%.

Why Online Lenders Might Be The Best Option for online businesses 

For many online businesses, online lenders are the sweet spot between speed, accessibility, and cost. Here’s why:

1. Quick Funding:

Online lenders provide fast funding, which can be really helpful to grow and operate your online business smoothly.

2. Flexible: 

For many business owners the requirements are a big issue, as more than 55% of businesses won't qualify at a bank. Online lenders make it way easier to qualify for a loan.

3. Convenience: 

The process to obtain a loan with an online lender is very simple & easy and can be completed entirely online.

Having access to funding for your online business is very important to manage & grow your company. Whether you go with an MCA, online lender, bank, or SBA loan, make sure the funding will improve the business.