Entrepreneurs Can Work a Loan Online
Is it possible to raise outside capital for your business on the Internet?
The short answer is yes, but that doesn’t tell the whole story. Its wonders notwithstanding, the Internet is no shortcut in the search for outside capital. Even as the number of Web sites targeting the financial needs of small business grows, so does the task of finding the right one for your business.
The Google search engine, for example, (https://www.google.com) offers no fewer than 2,160 matches to the search phrase “small business finance.” And while Google helps you winnow through them, 2,160 is a big number no matter how you look at it.
The problem seems bigger for those seeking investors rather than lenders. That’s because investors don’t necessarily back great business “ideas.” They back great business “managers,” and you can’t come to a judgment about the character of a manager via the Internet. It follows that those who offer you equity capital over the Internet may promise you more than they can deliver, or they may demand of you more than you want to give up.
In plain English, it takes face time to do a deal with an equity investor, so you should listen skeptically to anybody who, on the basis of a simple query to a Web site, wants to send you all the equity capital you need. Things just don’t happen that way.
It’s a different story for borrowing money. Lenders look for security in your assets and cash flow in addition to your character, so if you can show a healthy balance sheet and a decent credit rating, you can borrow money easily on the Internet. The smaller the amount, the easier.
Among the most useful sites for business borrowers are these three:
* Loanwise.com, (https://www.loanwise.com) operated by NetEarnings Inc., of San Mateo;
* America’s Business Funding Directory, (https://www.businessfinance.com) operated by BFS Inc., of Irvine;
* Business Finance Mart (https://www.bizfinance.com) operated by Capital Resource & Financial Inc., of Tallahassee, Fla.
Loanwise is a Web-based loan broker representing a number of banks nationwide--10 at last count--with more signing on monthly. You fill out an online application detailing your business operation and your need for the loan, along with some personal information. Once the Web site checks your personal and business credit ratings electronically, you can get an answer the same day for loans under $50,000. Loans for larger amounts require additional documentation, usually submitted by mail, so the approval process takes longer.
Given good credit, you may get offers from more than one lender, allowing you to choose the one with the best terms. Interest rates and other terms reflect the risk, of course, but they generally reflect those available from any business bank.
Loanwise’s lenders include American Express, the Bank of Hawaii, Irwin Union Bank, Provident Bank, Countrywide Business Alliance, Union Bank of California, Compass Bank, PNC Bank, Equilease Financial Services and a nonbank small-business lender called Business Loan Center Inc.
You can’t apply online with America’s Business Funding Directory, but Candace Outlaw, chief operating officer for BFS, says that might change early next year.
Instead, the site gathers your business and personal information, probes a database of hundreds of lending sources nationwide and lists those whose lending criteria appear to be a good fit for you. The Web page alerts the lenders of your query, prompting them to make contact with you. It also gives you the names and phone numbers of contacts at the lenders so that you can initiate the process yourself.
The site also offers useful pages detailing the ins and outs of commercial finance, equipment leasing, government funds, investment funds, real estate finance, venture capital, small business development councils and the Service Corps of Retired Executives, a nonprofit organization of business mentors and counselors (https://www.score.org).
The Business Finance Mart offers an online application for all kinds of loans, including factoring, sale-leaseback deals, loans guaranteed by the Small Business Administration, equipment leasing, lines of credit and start-up loans for entrepreneurs.
The Web site also has a bulletin board on which you can post items on buying or selling a business or buying or selling inventory or equipment.
In addition to these, lenders of every stripe maintain Web pages, including all of the big banks targeting business customers, plus commercial finance companies and other sources of business loans. Many allow you to submit online applications for business loans.
There is also no end of sites offering advice to the business borrower. Netscape, for example, offers one highly useful site (https://www.netscape.com/netcenter/smallbusiness/businessfinance) with a button (“Getting financing for your business”) that takes you to pages outlining:
* The financing options open to you at different points in your business life cycle;
* The advantages and disadvantages of debt versus equity financing;
* Sources of debt and equity financing, and
* Sources of government-backed financing.
The Web page of ZD Inc., publisher of PC Magazine, (https://www.zdnet.com/smallbusiness/filters/biz--2000/finance) details the process of seeking an SBA-backed loan and links you to sites from which you may download loan forms. The Web pages of Entrepreneur magazine (https://www.entrepreneurmag.com) and Inc. magazine (https://www.inc.com) are also useful.
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Next week: Finding equity capital on the Web.
Juan Hovey may be reached at (805) 492-7909 or via e-mail at jhovey@gte.net.
