Business owners are sometimes cautious thinkers, as they look out for every possible roadblock their business could encounter. As a result, they tend to pass everything they hear as fact, thereby shutting the realm of possibility on things that prove to be beneficial for their operations. This happens to include small business loans. It’s not as arduous to secure finances for your enterprise as some people would think.
According to reports, a lot of owners think that banks and other lending institutions fail to comprehensively explain all of the financing options and their requirements. Stories that are blown out of proportion from those who failed to secure loans can also imprint doubt on the minds of would-be loan applicants. Don’t fret, we’re here to set things straight.
Myth 1: The Small Business Association (SBA) directly provides business loans
The SBA, often handing out rules and regulations for small business loans, is often mistaken as a body that offers business lending directly. For the group to suggest guaranteed loans, it has to coordinate with banks, credit firms and similar organisations. A chunk of the loan is guaranteed, which in effect lowers the risks for potential lenders and increases the likelihood of companies to acquire small business funding.
Think of the SBA as a powerful broker that can pull strings. The government program will help you secure some of the most viable deals on the market. However, it doesn’t really dole out funds.
Myth 2: There are no other means to get a loan than from a bank
This is far from the truth. In fact, the bank is only one source of financing for companies. Other funding means, such as a merchant cash advances, unsecured business loans, crowdfunding, and community loans, are very much available and rapidly growing in adoption. Some of these measures even offer easier and more convenient payment schemes, which is why many business owners forgo traditional bank loans.
The application process for alternative lending, compared to banks, entails fewer prerequisites and more lenient evaluation, resulting in the quick procurement of funds.
Myth 3: No business plan means no loan
If we’re purely talking about banks, then this is probably no myth, as a comprehensive business plan is part of the requirements demanded by banks from loan applicants. The business plan points out how liquid a company can potentially be, if all the indicated measures are executed well. Preparing one, which is tedious and time consuming, is essential for any business. However, having no business plan does not mean you can’t get funded by lending firms.
Alternative lenders don’t require the lengthy document, along with financial statements and personal resumes, to hand out money. They merely look at how long your company has been in operation, the amount of monthly profits your company makes, your credit history, and the amount of money you need.
Myth 4: The amount of money applied for determines your qualification
There is a fear that a bank or a lending firm will deny a loan application if a large sum of cash is asked for. Truth be told, the amount of money to be loaned is not too big of a determinant, given that banks and lending institutions are supremely liquid. What they are more concerned about are your qualifications, particularly your ability to consistently pay the premiums.
Worry more about your credit rating, business plan and documentation rather than the amount if you are planning to apply for a loan.
Myth 5: Success dashes the need for small business loans
Business success, of course, eliminates some of the need for borrowed cash, but that does not mean you won’t benefit from a loan anymore. Remember, as a company flourishes, it will incur more needs especially when you’re looking at expansion or the utilisation of technological wonders, like big data and analytics.
You can always grab cash from your coffers, but sometimes it’s more convenient if you leave your operating capital untouched in case of emergencies. Small business loans provide an instant financial boost whenever needed.
Myth 6: Bad credit automatically disqualifies you from getting a loan
Banks have unknowingly manufactured a myth with their stringent requirements. Having bad credit dissuades people from trying to secure a loan, since banks aren’t likely to hand them funded. Alternative lenders gladly take in those with unfavorable credit scores and use other measures and criteria to determine loan qualification. You just have to prove that your business stands to earn more in the next several months, paving the way for bigger and more frequent deposits or credit card sales.
Myth 7: Lengthy loan approval and processing time
Time is critical in running a business. At the turn of a trend, the buying habits of people could change as well as their preferences. Owners who need fast business loans are often subjected to a waiting time of more than a month when dealing with banks and some lending firms. Bank loans, however, are not the only options available.
Alternative lending provides some of the quickest ways to get a loan. Companies like Ausvance have tailored their financing programs in such a way that potential debtors can get funds in a few days, especially those who avail a merchant cash advance.
Much of the requirements are sent and processed online, resulting in quick approval for applicants. Furthermore, the payment schemes are crafted to make the premiums quite manageable, even if a business has to hurdle a string of lean months.