While virtual banking already offers many services to business customers, the fledgling industry has a way to go before it makes getting a business loan as easy as it already makes managing cash flow.
By and large, you still have to meet with a loan officer to get a loan from a brick-and-mortar bank, and although virtual banks dispense with tellers and managers, they have yet to get rid of the business loan officer. They also have yet to figure out how to market the business loan. As a consequence, most virtual banks don't offer business loans at all, and those that plan to offer them expect to do so in traditional ways, with loan officers working out of ordinary offices in business and industrial areas. Simply put, although many Internet lenders target consumers, virtual banks don't yet serve business borrowers.
That doesn't mean you can't get a business loan on the Internet, however. Richard Warman, who runs Warman & Co., a small commercial cleaning service and supply house, in San Bruno, California, can tell you that doing so is fast and easy.
Last summer, responding to a radio commercial, Warman visited the Web site of LoanWise and filled out a simple application for $25,000 in working capital. Warman employs half a dozen people, and, like many other business owners, he needs working capital to smooth out the peaks and valleys of his receivables.
"It was quick,' says Warman, 37. "I applied online in the morning, and I got e-mail approving the loan at 1:10 p.m. on the same day-pretty exciting. Ten days later, I had the funds.'
A working capital loan of $25,000 isn't much by the standards of many small businesses, but it was crucial to Warman. He was all the more surprised to get it because, having filed for bankruptcy in 1991, he struggled for years to re-establish his credit, and his brick-and-mortar bank wouldn't lend him a penny, even though the bankruptcy is now off his record.
"They didn't ask for tax records or financial statements,' Warman says. "They asked basic questions-my name, the name of the business, the address, and so on-and I guess they pulled a credit report. It was much easier than going through all the paperwork with a bank branch.'
Warman's experience notwithstanding, it remains true that Internet lenders, like their brick-and-mortar competitors, target consumers not business owners. "You can't get a business loan from us today,' says Jonathan Lack, executive vice president of marketing and strategic planning at Compubank, "but you probably will be able to within the next year. There was so much concern about security when we launched that we decided to focus on core services on the theory that as customers become more confident about virtual banking in general, they'd feel more confident about borrowing money over the Internet, too.'
On the issue of expansion, Parlontieri expects to transform EBank's lending activities from a network of offices in the Southeast to a nationwide system within five years-and he, too, sees a continuing need for face-to-face meetings between loan officers and business borrowers. "We know small business, and we're going to use the Internet to create value for the business owner,' he says. "We'll rent office space and staff it with ATMs and loan officers. But we won't make loans over the Internet.'
The bottom line: If you need to borrow for your business, you need a brick-and-mortar bank-at least for now.