Running a business is more than a full-time job. When you’re just starting out or short on resources, chances are you simply don’t have the time to find financing on your own, even when you need it.
This is where business loan marketplaces can help. It cuts down on the time it takes to find a lender that meets your needs while providing resources to help you along the way. Read more to learn if business loan marketplaces can help your search for business loans.
A business loan marketplace is a service that connects you with multiple lenders after filling out a basic application, usually online. The main function of a business loan marketplace is to reduce the amount of time it takes to find a lender that meets your business’s needs and that you qualify for. It offers a huge perk in that its a way to basically pre-qualify with multiple lenders without affecting your credit score. On top of that, many offer resources to help first-time business loan borrowers navigate the process.
Using a marketplace to find a lender is usually free for borrowers, though some charge a service fee.
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Business loan marketplaces work a lot like online direct lenders at first glance. You typically have to fill out a brief application with basic information about your personal and business finances. But instead of getting one offer that you might qualify for, you’ll receive several from multiple lenders. Some marketplaces show all your options at once. Some give your contact information to its partners, that in turn reach out to you. Others do a combination of the two.
Some business loan marketplaces are more involved than others. While many free services stop after you choose a lender, some paid services like BoeFly continue to help you with your application and even pull strings with their partner lenders to make your application go through as quickly and smoothly as possible.
Business loan marketplaces are great for speeding up the amount of time it takes to find a lender or get assistance. However, you’ll always be limited to its network of partners.
| Business loan marketplace | Direct lender | |
|---|---|---|
| Application process | Fill out an application, get offers from several lenders and then continue with application through direct lender. | Fill out application to prequalify if available, review offer, submit documents and additional information and then sign loan documents if approved. |
| Fees | Some are free, while others charge a membership fee, flat-rate per loan or both. The direct lender charges interest and fees according to your loan term. | Usually no application fee. The cost of business loans might include origination fees, SBA guarantee fees, prepayment fees, late payment fees and more. |
| Sharing of information | Shares your personal information with vetted lenders who can use it for marketing purposes, with an option to opt out. | Generally doesn’t share your information with third-parties for marketing purposes. |
No. Peer-to-peer business lenders connect borrowers with funds from investors who finance your loan. They often offer a couple of loan products that come with interest rates, fees and terms that the peer-to-peer lender sets.
Marketplaces are connection services that tend to have many more loan options and don’t set the rates, fees or terms of loans. They’re a stepping stone to direct lenders, while peer-to-peer lenders are one-stop shops.
Despite these differences, it’s not uncommon to hear the terms peer-to-peer and marketplace lending used interchangeably. Some peer-to-peer lenders even refer to themselves as “peer-to-peer marketplaces.”
If you’re not sure which one you’re dealing with, you can usually get a clue from the way it works. If it mentions connecting you with investors, you’re probably looking at a peer-to-peer lender. If it mentions connecting with lenders, it’s likely you’re looking at a business loan marketplace.
Business loan marketplaces could be a great resource if you don’t have the time to compare lenders on your own or need help with the application process. But be aware that you’re restricted to its network of lenders and it might not always have your best interest in mind when it comes to the bottom line. You also might have to field calls from lenders even after you’ve signed off on a loan.
Not sure if a marketplace is right for you? Check out our guide to business loans to learn about your other options.
You repay your loan directly through your lender. Typically, your relationship with a business loan marketplace ends either after you’ve found a lender or after your funds are disbursed.
Some are. Look for a marketplace with a startup program or one that mentions funding new businesses.
You can, though you might have difficulty being matched with a lender or you may only get accepted with high interest rates. If you’re having trouble qualifying for a loan, take some time to focus on growing your business and improving your personal credit score before applying again.
No. Business loan brokers are professionals hired to present your application to lenders and find you financing. You typically have to pay a business loan broker a percentage of the financing you receive.
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