Online Vs. Traditional Business Loans: Which is Better?

The online medium has revolutionised the whole method of doing business. Everything is available online. When it comes to business loans too, the online platform has made it easy and convenient to avail business loans. Given the ease and speed with which online business loan is processed and granted, the loans have become popular too. But does that mean that traditional business loans have lost their appeal?

They have not. However, it is a debate deciding which is better – online or traditional business loans. So, let’s analyse both these loans on their comparative benefits and drawbacks–

Online business loans


  • Quick processing and sanction

The best feature of online business loans is that the loans are instantly processed and sanctioned. The disbursal time is short and the loan provides you with instant funds for your business

  • Minimal documentation

The documents required for availing an online business loan is limited. Only a handful of important documents are required before the loan is sanctioned.

  • Unsecured loans

Online business loans are unsecured loans which do not require collateral security or third party guarantee. These loans are ideal for businesses which have limited assets or their assets are tied-up in existing loans.


  • Limited loan quantum

Online loans are available for limited amounts. If your business requires a substantial loan, online loans are not available.

  • Higher interest

Since the loans are issued quickly and are unsecured, the interest rate on the loans is on the higher side.

Traditional business loans

Traditional loans are those which you avail by approaching a bank, submitting completed documents and then getting a loan approval. Their advantages and disadvantages are as follows –


  • Higher loan quantum

Traditional business loans allow a higher quantum of funds because the loans are offered after careful assessment of the business and its financial needs.

  • More loan options

Traditional loans can be offered as secured or unsecured loans. Moreover, different types of business loans are available through the traditional method of applying for the loan. So, you can avail the most suitable loan depending on the use of your business through traditional loans.

  • Low interest rates

Traditional loans reduce the risks undertaken by the lender since the lender can assess the repayment capacity of the business before granting the loan. As such, the interest rate is low. Moreover, if a secured business loan is taken, the interest rate would be low.


  • Longer processing time

Traditional loans take a longer time to be processed and sanctioned. Therefore, if your business is looking for a quick source of finance, traditional loans are unsuitable.

  • Elaborate application process

The application process is elaborate after which the loan is issued. Therefore, this elaborate process might seem tedious and hassling.

Which one is better?

To judge which loan is better, the requirement of the business needs to be judged. If your business needs quick funds and you don’t mind the higher interest rate, online loans are great. However, if your business requires a substantial amount of loan and you have assets to pledge as security, traditional loans are better as they would give you the desired loan amount and the interest rate would also be low. So, always assess the requirement of your business and then decide on the loan.

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