Common misconceptions about business loans: Every business needs capital for its successful running. While many business owners turn to various funding options, business loans still continue to be a fearsome venture for many. Below are the five major misconceptions about business loans that have led to a drop in the popularity of this easy funding option. 1.
Good credit score is the only way to avail a business loan: Credit history details the owners’ past financial dealings. A good credit history does indicate the person’s timely repayment of loans and reflects financial stability. However, today in general, for most lenders, credit history is not the sole criteria. As long as the business is able to demonstrate a credibility and potential for repayment of loans, business loans are sanctioned to such businesses. For more info about Business Loans for Construction Company click here.
2. Non-availability of small loans: Business loans can be availed for a number of reasons ranging from dealing with an unexpected expense, increased working capital, purchase of an inventory etc. Transparency during the application is the best bet to get the desired amount sanctioned. The borrower needs to convince the lender that the business will be able to service the debt within the deadline, and then the lender has no qualms in sanctioning even the smaller loans. 3. Banks are the best source of business loans: For a small business loan, banks and credit unions are not the best source for funding. There are many other options available including private lenders and other unconventional solutions like invoice factoring which also provide good small-scale loans to businesses. The paperwork is minimal and smaller loans are quicker to be sanctioned. The only drawback is higher interest rates but only because of higher flexibility of the terms. 4. Online lending is dubious: Great recession has sparked a surge in online business lending. There are many genuine lenders available online who fund businesses. The only consideration for borrowers looking for online lenders is to affirm the credibility of the lender and be thorough of the terms and conditions before going forward with the deal. 5.
Getting a loan is a time-consuming and tedious process: Availing a loan from a traditional bank is indeed a time consuming and paper and material intensive process. But with alternate sources of loans, business loans can be easily obtained, often within seven days of application, and with much less paperwork.
With alternative options and online lending gaining momentum in the business loans industry, most of these myths have now become obsolete.