But online loan exchanges like BoeFly and Biz2Credit say they can help. Both take loan applications from businesses and, using an automated system, match them with participating lenders.
The lenders pay a monthly fee to use the service and see all the applications that fit the criteria they set.
Though such exchanges have been around for years, observers say they are starting to gain more traction lately. Better technology is making the process easier for borrowers and lenders than what had been available online in the past. And with so many lenders pulling back, trying to get a loan by the typical method-calling around-is becoming impractical for business owners, says Bob Coleman, editor of the Coleman Report, a newsletter that focuses on the small-business loan market.
In a recent survey of lenders his publication conducted, 47 percent said they would not make a loan for a hospitality business, for example. So a borrower wanting to open a hotel might have trouble tracking down a willing lender without the help of an online loan exchange.
"If half of all lenders won't do it, they'll be wasting a lot of time," Coleman says. "By using this type of service, they can quickly find out what lenders would have an appetite for that product."
Several bankers who use BoeFly and Biz2Credit say they find the online exchanges useful.
Brian Carlson, the president and chief executive of the $229 million-asset Excel National Bank in Beverly Hills, Calif., says it is new to BoeFly, so has yet to close on a loan it found through the website. But it is in the process of booking a few.
He sees BoeFly as a means to find borrowers at less expense than with more traditional marketing methods, like print ads or direct mail. "It is a very cost- effective way of getting access to clients."
Laurie Peterson has a similar take on Biz2Credit. Peterson operates a loan production office in southern California for the $226 million-asset Celtic Bank in Salt Lake City, but makes Small Business Administration 7(a) loans nationwide.
She says she is "really pleased" with the results since she started using the service about five months ago. She is working on four loans, including one that is near closing. All are from other states, so it's business she would have missed if not for Biz2Credit.
She says a previous ad she took out in a local business journal generated a lot of calls, but no loans resulted. She finds Biz2Credit to be cheaper and more effective.
Though similar, BoeFly and Biz2Credit have some differences.
BoeFly offers two services for lenders, one to originate loans and one to sell them. The lenders pay $55 a month to originate loans or $165 month to both originate and sell loans.
They can solicit bids not only on small-business loans, but also nonperforming loans.
The six-year-old BoeFly began using new technology in March, when the company relaunched under its new name. It has had over $100 million in loan applications posted since then. (It was previously known as GovGex.com and the Small Business Loan Exchange.)
The automated matching is among the new features, and David Nayor, an executive vice president at BoeFly, says it has helped make the service more useful. "We're cutting down on having to look at those deals that really didn't fit for the banks," he says.
Biz2Credit, which started operating three years ago, has a range of monthly fees. It recommends lenders and brokers use what it calls a network plan for a $405 monthly fee. It also charges a transaction fee on closed loans.
Rohit Arora, the co-founder and CEO, says it gets about 2,000 loan applications each month.
Christine Pratt, a senior analyst at Aite Group in Boston, says there are a slew of online services for businesses seeking loans, all with different models. Some do not involve banks at all.
She is skeptical of the business value for banks, because she suspects those that apply for a loan through an online marketplace skew toward the less creditworthy. "My thinking is if you don't have good credit, you're more likely to do this than you are to go apply to your bank," she says.
Still, both BoeFly and Biz2Credit let lenders filter the applicants by credit score, geography, business type, or other factors.
In BoeFly's case, the lender sees a list of applications along with some basic details like loan size and which state the business is in. A compatibility score for each application indicates how well it matches up with the criteria set by the lender.
If interested, the lender asks the applicant for access to all the loan documents for review.
"This does not take the place of underwriting for a bank, but it is a first-pass look," Nayor says. After seeing details like collateral coverage, management experience and credit scores, as supplied by the applicant, the lender can decide whether to move further.
With Biz2Credit, the applicant sees a list of lenders.
The lenders are ranked, based on the probability of the loan closing and how well their loan products suit what the business owner wants to do.
The applicant can review details like the interest rate, processing time, and amount of documentation required by each lender, and contact whichever ones seem most appealing.
Arora says Biz2Credit calculates the closing probability based on how well the applicant fits the criteria set by the lender. A business credit rating, as determined by an agency such as Dun & Bradstreet, is incorporated into the loan application, which also helps in determining the probability of success.
Aite's Pratt says banks tend to be reluctant to use any third party to find loans if they can help it. But she does think banks can take a lesson from these online players-by accepting business loan applications through their own websites.
"There is an online market obviously. These guys wouldn't be doing this if there weren't an online market," Pratt says. "Take a piece from these guys' books."
She says the online loan exchanges generally offer "very simple forms" for business owners to fill out and banks should do the same.
"There's a frustration I'm sure on the part of many of these businesses that are trying to borrow money and are just going from bank to bank and getting turned down," Pratt says, adding that banks can win an advantage over their competitors by helping reduce the frustration. "There is an opportunity for online delivery."
