Small businesses benefit from taking out a loan to increase their capital and expand their operation when the opportunity presents itself.
“You may have heard stories about small business loans: they’re difficult to come by; your credit must be spotless, and you shouldn’t apply for this much money; otherwise, you’ll be turned down. Fortunately, myths about small business loans aren’t always accurate,” clarifies Shane Perry, small business loan advisor at Max Funding.
Continue reading to learn about some of the most common business loan myths that need serious debunking.
Top 5 Small Business Loan Myths Debunked
Myth #1: Only Small Businesses On The Verge Of Bankruptcy Need Loans
Small businesses might profit from small business loans in a variety of ways. However, small business owners may hesitate to take out a loan for their company because they believe that it implies that the company is in financial hardship.
Put another way; small business loans may be used for everything from buying inventory to funding expansions. But, of course, repaying the loan would raise the company’s monthly expenses. Therefore, like any financial decision, it is vital to only apply for small business loans if the circumstances truly necessitate it.
Myth #2: Obtaining A Small Company Loan Is The Most Challenging Task You Will Ever Face
Small business loans, like any other kind of funding, need planning and preparation. To be successful, you need to demonstrate to your lender that you can pay back your debts on time and regularly by keeping your records open and transparent. Prepare for the application procedure ahead of time, and you’ll avoid any unneeded hiccups.
Myth #3: Only Banks Can Grant Small Business Loans
There are other sources of financing for small business loans. Alternative lenders, private lending firms, and invoice factoring are commonly recognized as the principal source of small business loans among entrepreneurs.
However, there are a variety of choices accessible to small businesses seeking such financing. Thus, choosing the best one for your business can significantly help in your business growth.
Myth #4: Low Credit Scores Equate To A Lesser Chance Of Loan Approval
Alternative lenders don’t always mind if you have a low credit score. Whereas regular bank lenders seldom accept anything other than a perfect credit score when granting loan applications. Unfortunately, these stringent criteria make it more difficult for small startup companies to get business financing.
Still, an inconsistent or poor credit score does not always rule out business owners from getting loans. Private lenders often do not object if an applicant does not have a spotless credit history.
As a result of their focus on a business’s cash flow and sales, non-bank lenders can provide “easy-to-get” bank loans. In other words, small business loans are likely to be approved irrespective of the business owner’s credit rating if both of these requirements are met.
Myth #5: You Must Apply For A Minimal Amount Of Financing
This tidbit has most likely been shared with you by several financial forums and well-meaning acquaintances. Sure, that stands to reason when asking a friend for a loan. However, small business loans are very different.
Lenders benefit more from bigger loans because of the higher interest rates that are earned. But, lenders aren’t likely to offer you a massive loan for such a reason. Still, you must fulfil their requirements since the lenders want to ensure that you can repay the loan within a specific time.
Innovations in financial technologies have allowed small business loans to be more accessible and affordable to small business owners. Thus, it’s worth noting that most non-bank and alternative lenders have speedier loan approval rates compared to conventional bank lenders.
Moreover, traditional loan approval times might vary from a few weeks to a few months. Thus, non-bank lenders are generally the best alternative for any small business owner seeking a loan for immediate business-related needs.
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Author: Thomas Wiggins