December 7, 2023

Small Business Loan

4 min read

Where to get funds for business development is a frequent question among entrepreneurs. There are several ways to solve the problem: take a loan from a bank, arrange a loan with an MFI or attract funds from private investors. Crowdlanding sites can help with the latter, which is a good alternative for small businesses in case of lack of funds.

A crowd platform is an electronic platform where you can register online. To make full use of it, you need to go through the registration process to place applications, sign loan agreements and view investment proposals. Usually, this requires an organization’s TIN and information about the CEO or decision maker.

Collective lending platforms started to appear in 2010-2012. However, their popularity together with the amount of funds raised began to grow only in 2016. It should be noted that crowdlanding platforms are a separate way of raising funds, not a substitute for bank loans.

Compared to lending in the bank crowdlanding has a number of additional advantages:

  • you can get a loan on the site faster than at the bank. Crowdlanding services work with small businesses that need no more than 5 million rubles in debt. Such amounts are of little interest to banks due to the high cost of the loan disbursement process.
  • Crowdlanding platforms are more loyal. A bank may refuse a loan if it does not like the specifics of your business.
  • You can apply for a loan online, and within a few days you will be able to receive money to your current account. You will need to go to the bank in person.

What are the purposes for which funds can be raised through the platform?

Through the platform, a loan can be raised to replenish working capital, close the cash gap, execute a government contract or participate in a tender, less frequently for investment purposes.

Usually these are short-term loans for the amount of 5-10 million rubles for operational needs of the company.
If you need funds to buy expensive equipment or real estate, it is easier and more profitable to use the services of the bank.

How much is it worth?

The stakes on the sites are not much higher than in the banks. It is important to understand that the borrower overpays for time saved, convenience and service. Loans are provided online, without collateral and guarantors.

From the moment of submission of the application to the moment when the borrower sees the funds on the account, it takes a maximum of 2-3 days. Thanks to these conditions, some platforms on the market can already compete with banks.

The rate for loans now ranges from an average of 16.9% to 35% per annum. It depends on the product, the rating of the company, financial analysis data and the approach of the site to risk assessment.

On some sites there is a category of “non-rated” or “especially risky” clients, the rate on loans for which reaches up to 40%, but it is rather an exception than a rule.Besides, the borrower pays from 2% to 7% of the loan amount, which is the commission that the site charges for its services.

The scheme of work of the crowdlanding site is simple: the site checks the borrower, assesses his financial condition, assigns a rating to the company, organizes the logistics of money and takes care of the preparation of the contractual framework for the execution of the transaction.

And all this online. The application is considered from several hours to several days.

How to get a loan?

To begin with, you should decide on the site: compare prices, choose the conditions, think about the amount of the loan. Then register and place the application.

In the application you need to tell about the business, specify the necessary amount of the loan and the period for which you are ready to repay the loan, as well as to disclose in more detail the purpose of attracting funds: where they will be directed and what effect it will have on the company.

Attach the documents necessary for the analysis to the application. It is important that the company’s financial flows are transparent, and that the turnover passes through a current account or online cash register.

Business is analyzed remotely and, making a decision, the platform is oriented to the official reporting. In addition, it analyzes the credit history of the company and business owners, data from open sources – executive proceedings, arbitration cases, etc.

After receiving a positive decision, the site collects the necessary amount from investors, concludes a contract with the borrower, the borrower pays a commission and the money is transferred to the company’s current account.

From the moment of receiving the full set of documents to the issuance of the loan may take only 2.5 hours. In this case, at all stages of the client is a personal manager who will answer your questions and help you to quickly understand the rules.