List of Business Loan Myths You Shouldn't Believe
Posted: Feb 27, 2020
If you plan to grow your business and the time is right, getting a business loan can be a really smart move. It’s possible you’ve heard detractors advising you against them with grumblings like they’re hard to secure, your credit has to be exceptional, and so on. Many such myths, unfortunately, float around. While anecdotal evidence from other business owners is certainly helpful, don’t fall prey to, as they say, fake news. Presenting some of common ones below.
Getting a business loan is tough
Just like any other type of financing, a business loan involves preparation. Keep your books updated and transparent to show a lender you’re reliable and willing to service the debt on time. Prepare ahead of the application process, keep documents ready, and you have good chances of getting a loan.
Only a bank can give a business loan
Today, you actually have several ways to get financing; banks are no longer your only option. There are alternative lenders, NBFCs, and online lenders. In fact, several NBFCs have faster loan approvals and offer more flexible terms.
Financing large amounts is difficult
The loan amount you need should not really have an impact on final approval. Lending institutions are more than prepared to fulfil large requests if the borrower is qualified; in fact, large amounts are more profitable for them since they also get a higher interest amount. So apply for the loan amount you need for growth without worrying about approval. Just make sure you have adequate cash flows to make repayments.
Interest rate is the most important factor
While there’s no doubt about the importance of the interest rate on your business loan, but it’s only one piece of the puzzle. There are several other factors to keep in mind – the loan’s terms, repayment schedule, loan usage, to name a few. Don’t go for the lender offering the lowest interest rates. Instead, do your research and educate yourself on the technicalities of borrowing.
It takes a long time to get a loan
Gone are the days when it took months to get approval. Thanks to digitization of lending, lenders use the latest tech to quickly approve loan requests. Because a lot of work is now done online, cumbersome paperwork has been reduced, resulting in faster disbursal.
You need assets to borrow
Small businesses typically don’t have assets to put on the line as collateral, as opposed to big companies. This is why many lenders today offer unsecured business loans which don’t demand collateral. If the business defaults on payments, the owners may be responsible for paying out of their own pockets.
If you do your research and ignore myths surrounding borrowing, you will find the avenues to business growth are many. When thinking about taking out a business loan, do your research and pick the right lender. Do use easy but helpful tools like the business loan EMI calculator that is available on most lenders’ websites.
A mother of 2 lovely kids. Digital Marketer by profession and a blogger by passion! Here to inspire and motivate people with my writing.