If you needed a loan, would you shop around first, or go with the first lender you found? Small business owners are more likely to do the latter. Why? For small business owners, personal interaction is key. And with many lenders focusing strictly on online marketing methods to reach new customers, these findings may come as a surprise.
While there is a plethora of alternative online lending options for small businesses, a study by private small business loan firm National Funding. found that 44 percent of all loan applications are completed in person. The report also said that even though business owners of all ages surveyed reported using an online process for researching and initiating a loan application, only younger business owners were very open to using it to complete the process. [First Small Business Loan? 7 Things to Consider ]
User-friendly websites do help aid in conversion, the study found, but they don't influence lender choice. Instead, small business owners are more likely to use the first lender they meet – proof that even in an age of technology and advancements in online lending, human interaction is still one of the most important parts of the loan process.
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David Gilbert, CEO of National Funding, said this may be due to the challenges small businesses face during the loan process, as restrictions have increased on traditional loans.
"Despite great interest in strictly online alternative lending, many business owners still desire personal interactions with financial providers that will take the time to discuss business challenges and solutions," Gilbert said.
Gilbert added that it was reported last quarter that nearly half of small business that sought financing could not obtain a loan from a traditional bank.
The study was commissioned through the Experiential Learning Initiative at Northwestern University's Kellogg School of Management and surveyed 235 small business owners. Participants were between ages 21 and 65 and had either owned or managed a business with revenue of $150,000 to $1 million per year for more than two years.
Originally published on Business News Daily.