Running a business is no cakewalk. It requires your complete attention and hard work. To run the business seamlessly you need to have a proper flow of funds. This is possible with the help of business loans. Taking loans from banks, NBFCs or financial institutions gives us that flow of money which takes care of the financial hurdles in the business.
Following are the differences between online business loan and traditional business loan
Credit score:
When you opt for a traditional business loan, the bank or NBFCs or any other financial institution will first check your credit score. They will check whether you are a reliable client or not. They will see whether you have paid your credit bills, loans, EMIs on time or not. If satisfied with your status and credit score only then they will lend you the loan that you are seeking. However, in an Online Business loan, your credit score may not matter so much. It may not 100% give you the loan that you are seeking but it will cause fewer problems.
Amount of loan:
If you are seeking a large amount of loan from banks or NBFCs or any other financial institutions you will need to go the traditional way of taking loans from the bank. But if you are seeking a smaller amount of loans then you can rely on online lenders. For them, granting small loans is very easy and they can do it in no time.
The urgency of the loan:
Loans taken from a bank or financial institution that is not online can take really long. It will be much more difficult to get a loan traditionally from the banks than get it online. If you want a loan quickly the best alternative to the traditional loan is online lenders. For them granting loans is just a number. They can grant loans in a day or two from the date of application.
Business loans interest rate:
Loans from online business loan interest rates are higher than the traditional loan. This is because online lenders are taking more risk as compared to traditional bank loans. Bank loans are usually for a lesser interest rate than online lenders. Traditional banking has less risk as everything happens physically and not virtually.
Businesses that are at small scale vs those that on large scale:
If you own a business that is large in scale and you are in need of money you ought to go to a traditional bank loan. Traditional bank loans mainly cater to large industries, companies and businesses. Whereas if you are a small scale business you should apply for an online business loan. Online business loans have a speciality in small scale businesses and industries. Although their interest rates are comparatively high you get the loan within a day or two.
Bottom line:
Traditional bank loans are the best if you have a business that is expanded and large. Their interest rates are however lower than the online business loans, but they look at your credit score and evaluate your creditworthiness and only then are they likely to grant you the loan. If you are looking for funds and need it urgently the best option you have is online business loans. Traditional bank loans are best for long term loans that take time to avail.
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