Boston-based Eastern Bank is the latest entrant to this sizzling part of the small business lending industry, according to a recent report in The Wall Street Journal. The bank promises loans of up to $100,000 in a streamlined digital process that takes minutes, allowing some applicants to get money the same day rather than having to wait for weeks.
Until recently, to get credit that quickly, your options have been limited to non-bank lenders like OnDeck, Lending Club, and Biz2Credit, which use innovative credit scoring systems that don't rely only on traditional models, such as FICO score. Such lenders tend to specialize in loans of up to $40,000. Annual percentage rates, or APRs, on these loans can be 50 percent or more, as Inc. has reported in the past, however.
Eastern says it has adopted a similar credit scoring model, reportedly investing $4 million annually in new credit decision technology. It reportedly charges APRs of between 7 percent and 10 percent, which is more in line with traditional banks' small business lending practices.
Other mainstream banks have begun to offer small businesses access to quicker financing by joining forces with online lenders: JP Morgan Chase partnered with OnDeck in January, while last October Biz2Credit inked a deal with Customers Bank, and Fundation began working with Regions Bank. And Wells Fargo reportedly refers some small business clients that don't qualify for its traditional bank credit to CAN Capital.
As always, financial experts advise business owners to read the fine print and to understand all the rates and fees before signing up for such a loan. Additionally, you should understand the repayment criteria--some lenders require you to make daily repayments, debited directly from your business checking account. Finally, know who owns your loan. Some lenders may resell your loans once they've initiated them, which could affect your terms of service.