When running a business, working capital is essential to the financial health of a business. Thus, we cannot ignore the fact that small business loans are necessary to continue, grow, and expand your business. There is much information that you can get to help you with the loan application process including predetermined ideas of what to expect.
One of them is that a bank loan is the only business loan option for businesses. However, with the emerging trends in business borrowing, businesses can now have various choices where to get the additional money they need.
It is important that you have a guide to small business loans because there can be misconceptions about it. In order to give you accurate information, here is the list of most commonly heard misconceptions about small business loans.
LESSER CHANCES OF LOAN APPROVALS FOR BAD CREDIT SCORES
Because of rigid guidelines and processes, lenders would usually not accept businesses that have a credit score that is less than perfect when approving loan applications. It results in a misconception that new and small businesses would have a harder time to get their business loans approved.
To set the record straight, imperfect or bad credit score doesn’t mean that businesses don’t have any chance for their loan to be approved. Other lenders know that there are alternative indicators for businesses to repay a business loan.
Businesses can overcome this through different options aside from a perfect credit score. You can consider other business financings to provide you with a business loan even with a poor credit rating.
LOANS ARE ONLY FOR FAILING BUSINESSES
Oftentimes, the reason for businesses to acquire a loan is to put up additional capital because the business is in financial trouble. That is a misconception. Not all businesses that want to acquire a loan are failing, there are others that want to put up their business, make further developments, generate operational growth or acquire brand new equipment.
Thus, there are many reasons for businesses to obtain loans. As we all know, money is crucial for a variety of business purposes. Having the knowledge on how to get a business loan and get rid of misconceptions about business loans is extremely beneficial for your business.
On the other hand, your monthly expenditure would increase once you slowly pay your business loan. It is important that you know when to get a business loan for your business and the strategy you need to do to certainly pay your business loan.
NEED OF LOAN? ONLY BANKS CAN DO IT
From the start, banking institutions are the main providers of business loans. It becomes a misconception that only banks can provide loans for businesses. But now, there are many options you can choose from.
With further developments in the business world, there are now a variety of options that business owners can look up to when getting a small business loan. Some of the options include online alternative lenders, invoice factoring, private individual lenders, and many more.
Online alternative lenders tend to be seemingly appropriate for businesses that plan to borrow only small amounts of money. Aside from that, it is relatively quick and easier to get approval than a traditional bank. Since it involves lesser paperwork and processing compared to applying for a loan with the bank.
IT ALWAYS TAKES TIME
Countless people are quite aware of this misconception that approval for small business loans takes a very long time. This is one of the reasons why many businesses aren’t so enthusiastic about the idea of applying for a small business loan.
However, the truth is, nowadays it is quicker and easier for business loans to get approved. It will even just take hours for the approval to take place. So, business owners can get the funding they need right away.
Though other lending options would only take hours for the approval to happen, traditional bank lenders still take up time for the approval to happen. Moreover, traditional bank lenders’ approval rates can range from weeks to months depending on the paper works and requirements needed from you.
Thus, if you are looking for a small business loan for urgent and pressing business matters, alternative non-bank lenders are the best option for you.
There are many reasons for businesses to acquire small business loans. However, misconceptions oftentimes discourage businesses to press on with their desire to get a business loan. With that, clear and concise information is needed for business owners to eradicate these misconceptions and to understand that there are various options they can tap on how and where to get a business loan.
It is crucial that business owners should keep in mind that there are alternative lenders such as online lenders, private individuals, invoice factoring, and many other options that they can choose from when applying for a small business loan.