Running a business means making dozens of decisions all day long. One of the biggest decisions you will make is when to seek outside financing for your company. Simply making the decision to seek funding may feel like the tough part, but it’s just the beginning.
As you begin your funding search, you’ll quickly realize just how many options there are to choose from. Between traditional term loans from major banks, to business credit cards and lines of credit, to alternative lenders and fintech financers, the range of possibilities is huge.
For many growing independent businesses, even without a business credit score, fintech financers are attractive due to the comparative ease and speed of credit decisions and funding. To secure financing from most modern lenders or fintech companies, though, you’ll need to hand over personal information and connect your bank account to their services.
In the age of identity theft and data breaches, turning over sensitive data to third parties, this level of trust can feel like a massive leap of faith. How do you decide which firms are worthy of your trust?
Let’s take a look at five factors you need to consider as you zero in on the business lender or fintech financer that works best for your company.
1. Financing details
No two lenders are the same. Before you dive into a more granular comparison, you need to make sure the financers you’re assessing offer small business financing options that generally meet your needs. Here are some specific things to compare:
- How long is the application process? If you need money quickly, you can’t afford to endure an application process that requires hours of paperwork and lasts several weeks, or even months.
- What are the rates? Decide how much money are you willing to spend to finance your small business.
- How much financing do they offer? Some financers are willing to lend larger sums of money than others. On the flip side, sometimes you only want a small amount of capital, and some lenders have high minimum amounts that they will lend.
- What are the payment terms? Decide how quickly you will be able to repay your small business loan. Look at the repayment options available to you.
- What are the qualifications? Decide whether you have a good chance of qualifying for the funds you need. Is your credit score high enough to qualify for funding? Have you been in business long enough? Can you provide the information required in the loan application?
Once you’ve identified several lenders or fintech firms who offer financial vehicles that appeal to you, it’s time to evaluate their merits on other factors.
Has the lender you’re considering gone the extra mile to provide customers peace of mind by earning important certifications and accreditations? Do they follow industry best practice security protocols?
Over the course of your research, you may notice that some lenders display logos on their websites. These logos demonstrate various certifications and associations.
- Better Business Bureau. Founded in 1912, the Better Business Bureau (BBB) is the leading organization focused on advancing trust in the marketplace. BBB accreditation is given to businesses that have demonstrated their willingness to resolve customer complaints in good faith and operate honestly and transparently.
- Norton. For more than 30 years, Norton has helped consumers, businesses and other organizations ensure their computers remain optimized, protected and virus-free. What does it mean when you see a “Norton Secured” icon on a website? That’s a promise that the website has been authenticated by Norton. It supports encrypted data transmission. The logo also indicates a website does not contain any malware and is regularly monitored for security vulnerabilities.
- McAfee. Like Norton, McAfee has been keeping computers secure and functioning properly for more than 30 years. The company offers “McAfee Secure” certifications, which verify the website doesn’t contain malware or malicious links. It also has a valid SSL certificate, and does not allow phishing, among other things.
3. Customer validation
Finding out what other customers are saying about the company in question can help you make the right decision. You probably don’t want to partner with a lender that has a large number of critical customer reviews.
It’s easy to find out how customers view various lenders. There are a number of customer review sites that are filled with helpful information you can use to find a lender that works best for you. (As an example, here’s one that talks about Fundbox Reviews, and here’s the BBB’s page on Fundbox.)
You may also be able to find reviews on other sites, too. If a fintech company integrates with other companies, the partner company may publish reviews that can help you in your research. To use my company as an example again, Fundbox integrates with QuickBooks accounting software by Intuit, there are a lot of reviews for Fundbox on Quickbooks’ website.
When researching lenders, do a quick search for the ones you’re interested in online. If they’re worthy of your business, you should find a fair amount of reviews over time. For the most accurate assessments, look for sites that have been around longer and have collected many reviews for multiple companies.
4. News coverage
If you’ve never heard of a lender before, search the web. Look to see whether they’ve received any press coverage recently—positive or negative.
Assuming they’re in the news, you’ll either uncover some red flags or you’ll discover some good information about the firm of your choice.
If they’ve never been in the news, that might just mean they are brand new. Depending on your comfort level with everything else you learn about them, you may want to consider other companies that have been around a bit longer.
Transparency is a high priority for businesses today. It’s easy for anyone to claim that their business is transparent. However, it’s much tougher for a business to truly practice transparency.
When searching for a small business lender, consider whether they make a commitment to transparency—and how they put that into practice.
For example, you might ask: Does the lender list its address and contact information in a prominent place on its website? Or do you have to spend 10 minutes digging through the site to find a number to call? Is there even a phone number to call in the first place? Will an actual human be waiting on the other end to answer?
You might have found that many companies hide their contact information. This makes it tough for customers to get in touch with anyone. Good luck solving your problems if you can’t even find anyone to help you.
Look for financers that not only say they value transparency but actually back up those words with actions. Leading fintech firms tend to offer a wealth of information on their websites. This may include anything from knowledge bases and FAQs to pricing information and customer reviews.
Be ready for the next opportunity
From time to time, even the most successful small businesses can benefit from having access to extra capital, and decide to tap outside lenders for financing. As a responsible owner, when you find yourself in such a situation, you can’t simply partner with the first lender you come across.
By evaluating lenders across the five categories listed above, you’ll increase the chances you end up working with the one that’s best suited to meet your specific needs. You can then return your focus to what matters most once you have money in the bank. That focus is delighting your customers and jumping on the next opportunity to grow your business.
This guest article was written by Justin Reynolds, business writer for Fundbox. Justin enjoys exploring how technology, science, and creativity can help entrepreneurs be more productive.
Parts of this article originally appeared on the Fundbox business blog. With simple registration and a fast, automated application process, Fundbox offers credit limits up to $100,000 and can transfer funds as soon as the next business day.