By Evan Singer

Small business funding is vital to help grow the American economy as small businesses create two out of every three jobs in the United States. Affordable loan products allow small business owners to hire new workers, pay off debt, increase cash flow, grow their business and more.

However, since the financial crises of 2008, small business loans on the balance sheets of traditional banks are down about 20 percent (source: Harvard Business School).  Additionally, a recent statistic shows that only a third of small businesses indicate that they were able to get all of the funding they needed the last time they went to a financial institution (source: National Federation of Independent Businesses).

What options are available for an entrepreneur in search of loans to fund small business growth? Thanks to innovative technology, small business owners can now turn to new, innovative online options like SmartBiz.

Online and alternative lenders have several advantages over banks. First, they typically have a higher approval rating and a much faster application process.  For example, loan seekers can get pre-qualified in about 5 minutes for an SBA loan via the SmartBiz platform. This is great news as research shows small businesses spend, on average, 33 hours applying for credit, contacting financial institutions and submitting credit applications. (source: Federal Reserve Bank of New York). Many online lenders streamline that process, cutting down on valuable time small business owners spend on paperwork.  Once a loan seeker hits “submit,” the approval process is typically fast and efficient.

Unfortunately, some alternative lenders are filling the funding gap with sky-high APRs over 100%.  Also, loan payback time can be extremely unfavorable. Some short-term loans even require daily payments that can negatively impact small business cash flow.

The good news for loan seekers is that non-bank alternative lenders have been encouraged to sign the recently created Small Business Borrowers’ Bill of Rights. The right to transparent pricing and terms, the right to non-abusive products and other guidelines have been established to protect small business owners from predatory lending.

As an SBA loan marketplace, SmartBiz is already held to the highest standards by government regulators and we are thrilled that others in the industry are beginning to hold themselves to similar high standards.  This transparency in the small business lending industry will allow entrepreneurs to better compare the true cost of a loan from a variety of lenders.

The bottom line? Do your homework. SmartBiz encourages all loan seekers to carefully research small business loan options. We recommend using the loan constant, an interest factor used to calculate the debt service of a loan, to discern which loan is the most cost effective.

Evan Singer is the general manager for SmartBiz, the small business division at Better Finance.