Cash flow – it’s the lifeblood of your small business. You need clients to pay you so you can pay for a variety of items like equipment and and keep things humming right along financially. But where do you turn when invoices aren’t paid promptly? If you think about obtaining a standard loan or credit line from a large traditional bank to bridge the gap, you’ll probably start to have a headache. With all the hoops small business owners have to jump through, it’s no wonder that many are frustrated by the process. The application requirements involve many documents. The time for an approval decision can take weeks.

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However, a number of online lenders are, well, giving these traditional banks a run for their money. And as more of them enter the market and become popular, they’re no longer seen as a “fringe” way of financing but a very practical solution for some.

One of them, Kabbage, touts itself being able to help businesses qualify for credit lines as low as $2,000. The application takes minutes, the decision can often be made instantly and approved customers take as much as they want from the loan when they want rather than receiving it in one lump sum.

Another resource is Fundbox, which gives small business owners cash advances for outstanding invoices. The customer creates a free account, chooses an unpaid invoice to clear when funds are needed and then an advance is automatically transferred to the customer’s bank account. Advances are repaid, plus a small clearing fee ($52 - $72) over 12 weekly installments. Like Kabbage, the Fundbox minimum credit line starts very small – as small as $1,000, in fact – and borrowing on loan amounts can be done in just $100 increments. Large banks don’t typically concern themselves with smaller dollar values in a loan.

We’re also seeing PayPal and Square, who you’ve probably known primarily as payment processors, get into the lending arena. For Square, merchants are given a small amount that is repaid with a premium. The repayment is collected through the business’ credit card sales.

“OK, but what about the rates?”
One of the first questions many people have about online lenders concerns the rates they charge. However, several of these lenders are aiming to make their rates and fees as transparent as possible for the borrower’s benefit. So you know what your potential fees and weekly repayments are. There’s also an element of convenience, security and speed that often helps when cash flow is temporarily sluggish. These benefits are often outweighing any hesitation small business owners may have previously had about online lenders.

And this is just the tip of the financing iceberg.
Next month, we’ll take a closer look at peer-to-peer financing, which may not be as well known as a financing category but could also be a terrific fit for your business. There are more companies in the online lending space than ever and that can only mean good things for small businesses like yours.