Nowadays, obtaining a startup loan for your new (soon to grow) business is a great way to boost your investment as well as develop your business when the time is appropriate. You may have heard some grumblings about various small business startup loans, things like they are hard to obtain, you should not ask for a huge amount or your request will not receive approvals, your credit score needs to be flawless and more.
However, the good news is that these prominent myths not all-surrounding small business lending are actually true. Yes, it is important that you manage your debt properly; however, doing so can help your business to grow a lot faster at a higher rate rather than saving and scrimping.
In order to help you obtain your loan for your business, here’s debunking five common myths about small business loans.
Myth #1: Getting a Small Business Startup Loan Is Hard
Just like other financing forms, obtaining a small business loan is a task that requires preparation. You have to ensure that all your books are transparent and you can maintain the reserve liquidity in order to encourage the lender that you can provide your debt on time and it will lead to success. Most experts also recommend that it is best to avoid any form of snags way before time for the loan application process.
When it comes to small business financing, there’s a lot of frustration that can ease off by doing your due diligence. You need to be well prepared and keep all your documents ready at hand to present them to lenders.
Myth #2: You Need a Perfect Credit Score
For some lenders, having a low credit score is a top concern, but keep in mind that banks are not the only lenders you can turn to for finances. Alternatively, some private lenders can help you and they can offer flexible options, including which level of creditworthiness they should approve. According to the founder, Michael Kevitch, at Small Business Funding, “Although traditional banks could be restrictive, when it comes to getting credit, alternative options are available.”
Note that most alternative sites such as Aurumfi tend to base their lending decisions based on financial realities of a business, compares to the financial history of various business owners. Most alternative lenders can take a closer look at their business industry type, and business performance, as well as cash flow before they hand out a loan.
Myth #3: A Bank Is Your Only Option
Know that entrepreneurs all have more than one particular option to obtain their financing. Yes, turning to banks is not the only game in the town. You can turn to other private lenders as mentioned above, including creative lending such as invoice factoring. This helps most business owners to shore up their capital without actually going through the restrictive and lengthy process of application, which conventional lenders require.
For most business owners who search for ways to borrow small sums (about $5,000-$250,000), opting for a bank loan, probably will be more trouble compared to its worth. Note that banks are ideal for those businesses who wish to borrow a larger amount of cash and repay the loan over a longer time at a lower interest rate.
An alternative solution is alternative lending sources, which provide faster approvals for shorter repayment of loans, sometimes; the businesses could obtain better access to their funds in even a short time as seven days. This is because the interest rates and terms are usually more flexible.
Myth #4: Higher Amounts of Loan Means a Rejection of Your Request
The requested amount of principal loan should have an adverse impact especially o whether or not you are approved. Note that lending institutions, all generally prepare full requests for financing for the right sort of borrowers. In the end, this is a lot more lucrative. Hence, you should not worry about the money amount you need!
Banks usually prefer to lend larger amounts of money, mainly because it is more profitable from large loans. In return, banks can cut back on smaller business loans.
Myth #5: The Interest Rate is the Main Factor You Need to Consider
Sure, it may be easy to focus on the interest rate of your loan. However, the interest rate is something that tells the amount the lending will cost at the end of your repayment time. It is crucial information, but it is one aspect of the entire deal.
Even though the interest rate is a vital aspect you have to consider when you choose a lender, other factors are also important. You have to look at what the terms of the loan, the time you need to repay the money and exactly what you can use for the loan.
For more information and details, you can always consult experts in your area.