6 Tips for Navigating Online Lending Options Smart advice to help you apply for and land an online loan for your small business

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The following excerpt is from Entrepreneur's book Finance Your Business. Buy it now from Amazon | Barnes & Noble | iTunes

Small-business owners can have a particularly difficult time getting capital from a bank if they've been in business fewer than two years, if their credit score is less than 640 or if they need less than $250,000. Fortunately, there are alternatives to the traditional bank-installment loan. Online lending has been a source of innovation and promise for small businesses that are looking to invest and grow. According to statistics from Harvard Business School, although the total volume of small-business bank loans decreased by 3.1 percent in 2014, small-business online lending increased twofold.

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But how can small-business owners save time and get the most value out of the online lending process? Following are six key tips and insights for applying for a small-business loan online:

1. Ensure your finances are in order.

Online lending provides more adaptability and flexibility than traditional banks, but you should still provide solid business records that confirm your company is viable and can repay the money you borrow. Start with the basics: Make sure you have a registered business name and have incorpo­rated your business with a tax ID number and a business checking account.

2. Use online accounting software.

Digital tools like QuickBooks, FreshBooks or Xero can help even the smallest business manage their finances with accuracy and efficiency. With your informa­tion available digitally, it's easier to track your finances and prove you're a desirable loan candidate. The automation provided by Kabbage allows you to connect your online accounting software to evaluate the health of your business, so these online tools can improve the ease and probability of being approved.

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3. Keep business finances separate from personal finances.

Your small busi­ness should have a financial identity separate from your personal finances. If you pay invoices with personal checks or credit cards, you run the risk of overcomplicating your finances or not passing an audit. Establish a separate bank account and credit card to man­age all your business spending under your business name.

4. Understand fees (especially hidden fees) from online lenders.

Pay attention to the fine print of any loan application. Ask questions upfront to ensure you understand loan fees, interest, originations and any other costs you'll pay for your loan. If there's something you don't understand, be sure to ask before you sign on the dotted line.

5. Research the qualities of each lender, such as customer service, price and more.

Other than access to capital, what do you need most from your small business lender? Compare your options and read customer reviews on sites like Trustpilot. The lowest-priced loan option might not always be the best fit, especially if other small-business owners report hidden fees or has­sles with customer service.

6. Keep an eye on security.

Getting a loan online might seem riskier than going through a traditional bank, but a few basic precautions can help you keep your personal information safe. First, research each potential lender to make sure the company is reputable. Second, con­firm you're sending any financial information via a secure (https://) website connection. Finally, be wary of any lender that asks for an upfront application fee or an immediate down payment before your loan is approved. Legitimate lenders will package any fees as part of the overall repayment plan rather than charging you upfront.

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There has never been a better time to get small-business financing online. Using these tips can help you weigh your options to get the funding you need to grow your business.

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