How to Choose a Lending Marketplace

6 min read • Mar 08, 2021 • Mary Kate Miller

Most small businesses that apply for bank loans are denied. That doesn’t mean their capital needs disappear. So where should businesses turn when they need a loan? Lending marketplaces have taken up the mantle, providing small businesses the opportunity to compare offers from multiple lenders.

Which Lenders Are in the Marketplace (and How Many Do They Work With)?

The benefit of applying for a business loan through a marketplace is getting access to multiple lenders in one spot. As such, the draw of a marketplace is only as strong as its lenders. Before you settle on a marketplace, look at their list of lenders. You can expect to see financial technology (fintech) lenders and many smaller lenders.

What should you look for? You want to see at least 1 or 2 names you recognize. You may see OnDeck or other names you recognize. You can also do a quick Google on some of the lenders to check their reviews. If the marketplace is full of smaller lenders with great reviews, that’s a good sign, too. 

What Loan Products Can You Choose From?

Variety is the spice of life, and a primo lending marketplace should make you feel like you’re exploring a top-notch breakfast buffet (pre-COVID). If all they have is cereal, it’s going to be a no-go. In addition to the cereal, you want to see some metaphorical fruit, bagels, bacon, and a customized omelet station. So what does that look like for a lending marketplace?

You can expect to see business term loans. That’s the traditional loan people tend to think of when they picture a small business loan in their heads, but there are tons of other loan options that may be more tailored to meet your business’s specific needs. Equipment loans can help you finance everything from a tractor to computer equipment. ACH loans offer rapid financing when cash flow is your primary concern. Business lines of credit offer you financial flexibility and the opportunity for repeat borrowing. 

A robust lending marketplace will offer products like: 

What Kind of Customer Support Is Offered?

The ideal lending marketplace marries the ease and convenience of technology with the customer experience that comes from being able to talk to human beings. Check to see if the lending marketplace matches you with someone who can walk you through the process. If an issue comes up, do they have a customer service line? You can get a good sense of a lending marketplace’s customer service by checking their Trustpilot reviews and taking a glance at their Twitter account. Do they seem responsive? 

Do They Charge Fees?

There are 2 ways for a lending marketplace to make money. They can charge a fee to the lender, or they can charge additional fees to the borrower. Watch out for application fees and ask if there are any additional fees you can expect to be charged. 

Also, be aware that once you’re approved for a loan, many lenders will charge an origination fee (a one-time fee to cover the administrative costs of servicing the loan). Those are charged by the lender, not the marketplace, and they can be expected as a pretty routine part of the process. 

Is My Information Secure?

Applying for a loan requires you to enter sensitive financial information. You want to choose a lending marketplace with a secure application and portal to ensure your information is protected. 

Can You Talk to an Expert?

Most business owners aren’t experts in small business loans, and that’s OK. A good lending marketplace should match you with someone who is. A loan expert can answer any questions, help you compare lenders, and walk you through the finishing touches of your application and set you up for success when applying. 

Will It Impact My Credit?

Look for lending marketplaces that perform soft credit pulls on the application. A soft credit pull doesn’t affect your credit, so if you decide not to apply for a loan, no sweat. A hard credit pull will affect your credit. Once you settle on a lender, you’ll likely have to do a hard credit pull, but that shouldn’t happen at the time of the marketplace application. Think of it like this: a reputable department store wouldn’t swipe your credit card just for walking through the door. 

Is the Marketplace—and its Lenders—Trustworthy?

Checking review sites like TrustPilot, Yelp, Glassdoor, Facebook, and Google Reviews can give you insight into what kind of experience past customers have had working with your lender or lending marketplace. Was the lender or lending marketplace transparent about the process? Were they communicative? What surprises occurred along the way?

How Fast Can I Get Funding?

Ask how quickly you can get funded. Some lenders can fund in as little as 24 to 72 hours after approval. Time is money, and getting a $50,000 loan in 6 weeks isn’t any good if you need $20,000 in the next week. 

Will I Qualify? (Remember—Many Banks Say No)

Many small business owners won’t meet the qualifications when applying for a bank loan. Lending marketplaces should give you a sense of whether or not you’ll qualify. Because qualifications vary from product to product, you may have to check out the product page for a specific loan to get a sense of the qualifications. Ultimately, it’s all an estimate, but a reputable lending marketplace should give you a sense of what to expect before you apply. 

We’ve been working to make access to business capital more accessible since 2011. When you apply through Lendio, you can access offers from our network of 75+ lenders. You wouldn’t book a flight without checking prices from multiple airlines, so why secure a loan without seeing what all your options are? Apply now to start comparing.

 

Disclaimer: The information provided in this post does not, and is not intended to, constitute business, legal, tax, or accounting advice. All information, content, and materials available in this post are for general informational purposes only. Readers of this post should contact their attorney, business advisor, or tax advisor to obtain advice with respect to any particular matter.
Mary Kate Miller

Mary Kate Miller

Mary Kate Miller is a writer based in Chicago, IL. She specializes in covering finance (personal and business), investing, and real estate. Her mission in life is to give readers the confidence and the knowledge needed to grow their wealth by making financial topics more accessible. When she's not writing about topics like business loans, you can find her playing armchair financial advisor to the Real Housewives.