Find the best business loan rates (2024)

Are Online Lenders Safe?

In 2020, 20% of firms surveyed by the Federal Reserve Banks applied for business financing through an online lender. Needless to say, there are safe online lenders and many businesses are turning to them for the funding they need. 

Here’s what you need to know to determine “legit” online loans and lenders from unsafe ones. Also, discover the pros and cons of considering this alternative funding source to boost business capital.

Graphics of 2 computer monitors side by side, one has a green checkmark and the words “Apply for a Loan”, the other a red X and the word “Buy”

Is Applying for a Loan Online Safe for Your Business?

Applying for an online business loan is safe in many cases. As in any business, however, there are scrupulous players and unscrupulous ones. 

How to Avoid Unsafe Business Lenders

When you’re wondering how to know if a loan company is legit, here are a few questions to ask yourself:

  • Do they have online reviews and/or ratings? What do they say?
  • How does their website look? Are there typos? Is a legitimate physical address listed?
  • Is their website address secure with an “https” and lock icon to the left of the URL?
  • Are they saying you’ll be approved regardless of your credit score or revenue?
  • Are they asking for payment upfront?
  • Are they pressuring you to make a decision quickly?
  • Are they being transparent about fees, rates and repayment terms?

How to Check If a Loan Company Is Legitimate

How to tell if a loan company is legit doesn’t require a detective’s hat, just a bit of digging. You can research companies in the alternative lending industry by doing the following.

Look at Reviews 

Legitimate online lending companies should have an online presence. Search notable review and ratings sites, such as the Better Business Bureau (BBB), Trustpilot and Google Reviews, to see what people are saying. 

Evaluate Their Commitment to Responsible Lending

Ensure the online lender you’re dealing with is transparent and upfront about the terms of your proposed financing agreement. In addition to evaluating your personal experience with them, see if they have made a public statement of their commitment to transparency. 

For instance, many online business lenders and lending marketplaces have made it a point to adhere to the Small Business Borrowers’ Bill of Rights. This declaration was established by nonprofit and for-profit lenders, investors and small business advocates known as the Responsible Business Lending Coalition and includes the following borrower rights:

  • Fair treatment from brokers and lead generators
  • Transparent pricing and terms
  • Non-abusive products (e.g., no debt traps, pressure-free, fair prepayment)
  • Responsible underwriting
  • Inclusive credit access (i.e., nondiscrimination)
  • Fair collection practices

Research Legitimacy

A quick Internet search can reveal a lot about a company, but you can conduct a more thorough search if you’re not convinced. Look to see if the lender is registered to conduct business. You could do this by contacting your state attorney general’s office, which you can find online by visiting the National Association of Attorneys General. You could also search your state’s official website for the business’s status in the state from which they operate. 

Check Out Their Social Media Presence

Many reputable companies have taken to social media to market their brand. Determine if the lender has a presence on Facebook, Instagram, Twitter and LinkedIn. Search through their posts and see if they have customer testimonials, positive comments and a significant following. See if they’re posting regularly and what they’re posting about. What you find could help you make a decision on one lender over another. 

Pros of Online Lenders for Business Loans

Extremely Fast Funding

Thanks to automated underwriting and alternative financing products, legit online lending providers could offer access to funding as soon as 1 day of approval in some cases. This is in stark contrast to the approval process often encountered by entrepreneurs who’ve applied at conventional banks. Long application and approval wait times were actually the most common hardships applicants experienced with banks, as indicated in the Small Business Credit Survey

Less Stringent Requirements

Online lenders often have fewer requirements when it comes to paperwork needed to review you for approval. Additionally, specific collateral is usually not required. They also don’t have as high credit score requirements as many banks do. In fact, 35% of surveyed businesses that applied to online lenders had medium-to-high credit risk, according to the Federal Reserve Banks’ report. All of these factors equate to many borrowers having greater chances of approval. 

Prequalification Doesn’t Impact Credit

Usually, online lenders can give you a snapshot of what you could qualify for without impacting your credit score. This is because they perform a soft credit check initially, which doesn’t affect your credit, as opposed to a hard credit check, which does. 

Cons of Online Lenders for Business Loans

No In-Person Interactions

With online lenders, there are no face-to-face sit-downs like you’d have at a conventional bank. You’ll need to direct any questions via phone, email or chat (if available). If you place a high priority on the in-person facet of applying for a business loan, an online lender may not be the right fit for you. 

Sensitive Data Transmission

While a fully online application process can be seen as a positive for many, for some, the idea of transmitting sensitive information over the web causes hesitancy. Keep in mind, though, legitimate online lenders have processes in place designed to protect your sensitive information. This can include when you submit business information initially for prequalification or upload documentation, such as bank statements, for evaluation of approval. 

Less Competitive Terms

While safe online loans are out there, you may find that interest rates are higher, payment installments are more frequent and terms are shorter in length. Because online lenders are more apt to approve a wider range of business loan applicants, they offset that risk with terms that may be less favorable than could be found with banks and credit unions.

Tablet with the words “Pros and Cons of Online Lenders” and a green thumbs up with 3 pros listed and a red thumbs down with 3 cons listed

Legitimate Alternative Business Lending Companies

Below are a few well-known direct online lenders. Keep in mind, direct lenders differ from online lending marketplaces, such as Fast Capital 360, which work with multiple lending partners and, as such, could be able to provide various financing offers with a single application. 


Lines of credit and short-term business loans are available at OnDeck, which has earned a 4.8-star rating on Trustpilot and a 4.7-star rating on Google. Additionally, this online lender is not only accredited with the BBB, but it’s also earned the organization’s A+ rating.


BlueVine offers invoice factoring and business lines of credit. This legitimate online lender is accredited by the BBB, earning the organization’s A+ rating. BlueVine also has a 4.4-star rating on Trustpilot.

CAN Capital

CAN Capital offers short-term business loans and merchant cash advances. Funding is available from $2,500-$250,000. This online lender has earned a 4.6-star Trustpilot rating from more than 700 customers. It’s also A+ rated with the BBB.

Online Lending Facts and Figures

Here are a few additional data points about online business lenders noted in surveys from the Federal Reserve Banks.

  • Smaller firms (revenue of $1 million or less) apply with online lenders more often than conventional lenders.
  • Black- and Hispanic-owned businesses have the greatest application rates among online lenders.
  • In terms of lender satisfaction, 43% of applicants with online lenders were satisfied.
  • Applicants to online lenders are more likely to apply for funding to cover operating expenses.
  • Many online lenders place more weight on an applicant’s cash flow as opposed to credit score for decision making.
  • In spite of having lower credit scores, business financing applicants who sought funding from online lenders reported having greater success than applicants who sought capital from conventional lenders.
Erin has more than 15 years’ experience writing, proofreading and editing web content, technical documentation, instructional materials, marketing copy, editorials, social copy and creative content. In her role at Fast Capital 360, Erin covers topics of interest to small business owners, including sales, marketing, business management and financing.
Get industry-leading advice to help you make confident decisions.
Back to Top