For small businesses looking to start and grow their operations, securing funding is a crucial — and sometimes daunting — task. During the U.S. Chamber of Commerce’s America’s Top Small Business Summit: Ready. Set. Scale., host Steve Patterson spoke with Cory Kampfer, Co-President of Small Business Lending at Enova, about the small business funding process.
Read on for Kampfer’s insights on funding for large versus small businesses, myths about online small business lending, and advice for entrepreneurs who feel trepidation about applying for a loan online.
Traditional financial institutions aren’t always built for small businesses
Traditional banks tend to favor larger businesses that need larger loans, leaving small businesses underserved in the funding space. Kampfer noted that the cost of underwriting and processing can withhold banks from dealing with loans below six or seven figures, leaving small businesses searching for appropriate funding.
“It’s very difficult for the traditional financial institutions that leverage more traditional underwriting to make those decisions very expediently,” Kampfer emphasized. “And then, often at the end of that process, it’s a ‘no’ in terms of extension [of] credit.”
Online lenders, particularly those that specialize in serving small businesses, are often better suited to meet the needs of growing companies. For instance, Enova’s small business loans have serviced almost 800 different industries, with their primary customer being Main Street small businesses, such as a dentist’s office or hardware store. The online lender’s loans range from $5,000 to $250,000, averaging around $50,000.
“We're able to provide that online application that they can apply for after business hours. They don't have to go into a bank branch,” he elaborated. “And they can get a quick decision in a matter of minutes and funding as soon as the next day.”
[Read More: Missed the Summit? Watch the recap here.]
Any lender who's not providing you with a very clear readout of exactly what [your loan terms] look like and [isn’t] willing to talk you through the process is someone you may want to be a bit wary of, because it is a big decision. [Explaining] how everything works in a very clear and simple way is something we've been always committed to doing and we think it's the right thing for our customers.
Cory Kampfer, Co-President of Small Business Lending, Enova
Online small business lending expedites the approval process
Kampfer cited data that found that the traditional funding process can take 26 hours of a business owner’s time over a span of several weeks. With online small business lending, more small business owners are taking the process into their own hands and receiving a decision within minutes.
“People were gravitating more and more to doing things online pre-pandemic,” he explained. “The pandemic really accelerated that push, [and] people got even more comfortable doing things online. It's … easy to apply for that loan … when it's convenient for you … and then get the answer [quickly].”
Knowing the likelihood of approval and being provided real-time feedback makes the process efficient for busy small business owners who are in need of immediate funding and are unable to wait the traditional length of time.
Kampfer mentioned that after a completed background check, subsequent loans take even less time, and it’s not uncommon for businesses to acquire recurring funding and utilize a line of credit as goals and metrics are accomplished. In some instances, businesses have used 20 or more term loans to meet their needs.
When applying for a business loan online, transparency is critical
Some entrepreneurs may feel trepidation about applying online for a decision as significant as funding their business. For small business owners in the process of vetting lending options, Kampfer emphasized that transparency and disclosure are key.
“Any lender who's not providing you with a very clear readout of exactly what [your loan terms] look like and [isn’t] willing to talk you through the process is someone you may want to be a bit wary of, because it is a big decision,” he said. “[Explaining] how everything works in a very clear and simple way is something we've been always committed to doing and we think it's the right thing for our customers.”
By providing this information up front, small business owners are better equipped to make informed decisions and potentially secure the necessary funding for their companies to start, run, and grow.
[Read more: America's Top Small Business Awards Gala 2023]
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
