The Difference Between SBA Loans and Online Lenders

best online business loans


Are you looking for an SBA loan or a reliable online lender? Not sure what the difference is?


SBA loans (or government small business loans) are what many startups gravitate towards at first. However, online loan lenders have raised the financing bar, so to speak, and can provide high-quality small business loans just like the SBA.


Let’s talk about the difference between Small Business Administration loans and online financing providers.

SBA Loans


The Small Business Administration is a government organization that supports small businesses all across America. They are often a startup company’s first stop for information about forming a business, going through legal processes, and finding resources needed to keep it going.


Many people look to the SBA for governmental small business loans, but the SBA doesn’t actually provide the loans themselves- not directly. They act as an intermediary, working with lenders who want to offer loans to small startups.


You can receive anywhere from $500 to $5.5 million in funding from the SBA. However, certain strict guidelines must be met to be eligible- a difference compared to non-traditional lenders.


For example, your business must be a for-profit company, located in the USA, have equity invested per the business owner, and not have any other financing options available. With that said, minor requirements for each loan will be different since the SBA works with many individual lenders.

Online Loan Lenders


Online loan lenders are credit providers that operate independently from governmental organizations. Unlike the SBA (or governmental small business loans), online lenders have their own business model that relies on technology and data-driven processes.


When a business owner applies for financing, there is no intermediary involved. It’s just the applicant and lender working together which makes a difference.


The overall journey from start to finish is more straightforward than SBA loans as well. You just apply, have your application processed, and receiving funding- all over the internet.


From 2016-2018, the percent of applicants who used an online lender skyrocketed from 19% to 32%. So, it’s safe to say that securing funding through non-traditional lenders is becoming popular.

What to Consider Before Choosing SBA or Online Lenders


sba or online lenders


Before you head off to get an SBA loan or find funding through online lenders, listen up. Consider these factors first.

Loan Approval Speed


Working with an online loan lender is the quickest option to receive funding. If you opt for a merchant cash advance, you can get a loan within 24hrs.

Cost of Borrowing


SBA loans have decent rates for the most part. But online options are quite competitive as well. Make sure the borrowing cost is clearly outlined so that you fully understand the cost involved.

Eligibility Requirements


Governmental small business loans usually have more requirements than online lenders. This is why many people seek out online lenders- to avoid extra hurdles.

Online Lenders Are a Quicker Alternative to SBA Loans


Government small business loans might seem like the best option, but only 1/5 of businesses will be approved through traditional lenders. Online loan lenders have less strict guidelines and can usually meet your funding needs.


Merchant Funding Solutions provides quick cash to all types of small businesses, from restaurants to trucking companies. It only takes a second to see how much funding you can qualify for.

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