Gone are the days when getting a business loan approved was a luxury. Today, with the rising number of lenders and banks on the market, it has become fairly easy to fetch a handsome loan and support your business. However, a few myths can make people think otherwise.
Business loans are often defamed by people who lack knowledge about them which is why many business entrepreneurs tend to stay away from these loans thinking they are hard to get, they serve as a way for banks to lure businesses etc., but that’s not true.
Business loans are actually designed to help businesses. Yes, they have caused many businesses to go bankrupt or lose money, but that is only due to poor financial management and not exactly due to loans.
Reality is that you need cash to make your business grow and business loans, such as those provided by Kapitus, can help you achieve that. In fact, for many businesses, especially small businesses and startups, loans are the only way to raise a capital as new businesses need some time before they make a mark in the industry.
If you are an entrepreneur confused about loans, then you have landed on the right page.
Here are a few business loan myths debunked:
- Business Loans Are Costly
Loans serve as a way to fill the financial void that a business may be suffering from. However, many entrepreneurs think that business loans are way too costly and hard to bear both for short and long terms but that’s not true.
The reality is that business loans are much cheaper than other loans. For example, the interest rate on some personal loans is as high as 30% while the interest rate on business loans ranges between 5% to 21%.
Also, business loans provide longer time frames to repay the loan compared to other loans. This depends on a number of factors, including the type of loan, the amount loaned and the institution you are dealing with.
- Banks Are Your Only Option
There was a time when business loans were given by banks only. However, things have changed now as loan terms became strict after the recessions seen in 2008, and a record number of loan applications started to get rejected.
This is when alternative finance options began to rise in the form of non-banking lenders, such as investors, venture capital firms and loan companies. The lending standards of these options were much lighter compared to banks and business loans soon became more accessible to a wider range of startups and mature businesses.
- They Are Difficult To Get
Most businesses think loans are out of reach because they are not aware of the requirements to get a business loan in the first place.
According to Unsecuredbusinessloans.com.au to get a business loan, you mainly need to excel in two departments, your credit score and business plan. Credit score determines how good a business has been in the past in dealing with finances while a business plan gives a rough idea on how the business will use the money.
If you have these two things on point then getting a business loan will not be difficult.
- You Can’t Get A Business Loan If You Don’t Have The Perfect Credit Score
SBA and bank loans ask for a credit rating of 700+ which can be a problem for many businesses but that doesn’t mean you cannot get a loan if you have a lower credit score.
There are several other institutions that offer business loans even to those with a lower credit score. If you have a score of at least 550, then you can easily get a loan approved from other organizations.