Business financing is one of the most effective strategies to grow your company to new heights. It enables entrepreneurs to grab every opportunity that comes their way. However, as soon as you decide to apply for a business loan, you will come across a number of misconceptions that may force you to reconsider your decision. In this post, we will debunk some of the most common myths concerning a business loan and help you take an informed decision.
You Require the Perfect Credit Score:
How many times have you heard a friend or relative remark that if you have a bad credit score, you won’t be able to get a small business loan? Quite often, right? Although this is partially correct, it is not entirely so. You might have an ordinary credit score due to a variety of factors, such as delay in monthly loan payments, your credit score not being upgraded after a previous loan was closed by the lender, and so on. Furthermore, if you are a first-time borrower, your credit score will be low. As such, if you are a first-time borrower or have a low credit score as a result of the lender’s mistake, you can get a business loan by including a co-applicant or guarantor on your application or putting up some type of collateral.
Low Amount:
Some argue that a business loan is too small a sum to meet your business needs. If you think this is true, you are saying no to a lot of business opportunities. One of the most common misconceptions that need to be dispelled is that business loans are only available in small amounts. The truth is that business loans are available in customised forms. You will find a variety of business financing solutions for diverse business needs, such as medical equipment financing, machinery loans for plant and machinery purchases, and unsecured business term loans for small business needs. You will be surprised to learn that even a collateral-free business loan can be obtained for a sum between Rs 5 lakhs and Rs 25 lakhs.
Lengthy Disbursal Time:
Usually, those who have applied for a loan with traditional financial institutions a decade ago spread the rumour that it takes a few months to get a business loan. This statement, however, is a complete myth in the digital age. Financial institutions nowadays use artificial intelligence and machine learning technologies for a variety of purposes, one of which is evaluating applicant profiles utilising technological advancements. Therefore, when you apply for a business loan with a modern-age financial institution, the lender instantly approves your loan as soon as you submit your application form. Moreover, the disbursement time is also reduced to a great extent, and the funds are disbursed to your account within 48 hours of approval.
Interest is the Only Aspect to Consider:
Modern borrowers, when applying for any sort of loan, usually tend to compare the interest rate only. But do you think you are getting a fair bargain if you secure a low-interest business loan for only 25% of the cash you need? The answer is no. As such, when comparing the business loan products of different lenders, check the minimum and maximum loan amount, flexibility in repayment terms, other costs associated with lending, and a few more things apart from the interest rate. Before signing your business loan agreement, make sure the amount you are offered is adequate to cover your business needs.
Available Only to Large Businesses:
Another prevalent myth about business loans is that they are exclusively available to large firms. This, however, is not the case. Small and medium-sized businesses can now readily obtain loans from financial institutions. Whether you are running a shop or own a small handicraft business, you can easily apply for a loan if you fulfill the lender’s simple eligibility criteria. Furthermore, there are multiple government schemes that provide business loans to start-ups, as well as small groups of women in villages who want to establish a business such as pickle production, knitting, or sewing, among other things. So, the next time you decide to apply for business financing, instead of listening to rumors, examine the list of required documents and go over the lender’s qualifying requirements.
Only Banks Offer Business Loan:
With the evolution of the financial landscape in India, the monopoly of banking institutions is no longer in the picture. If someone claims that only banking institutions provide business financing, he is either living in the 1950s or in a remote part of India with no access to the internet, television, or newspapers. Nowadays, there are a plethora of business loan providers in India who provide funding for your business at low-interest rates and without asking for a long list of documents.
To Conclude
Now that you are aware of the common misconceptions about business loans, it’s time to use a business loan to raise capital for your company without having to worry about anything.
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