In starting a new business or expanding an existing one, you must consider various financing methods. One excellent way to finance your business is through a business loan. You can avoid using your funds or savings by applying for a business loan.
However, many misconceptions associated with business loans discourage business owners from considering business loans as a way to finance their businesses. Let’s look at the top six common misconceptions to clarify them, so you have all the information you need before deciding which loan is best for your business.
Business loan applications are time-consuming
At first, it would take months to approve loan applications. Before the money is issued, you must undergo a lengthy process of providing detailed information, which only worsens the stress. That, however, is no longer the case.
With the rise of technology, business loans are now approved quickly and easily. You won’t need to worry about the lengthy procedure as you can now apply for business loans online and receive an approval within days with effective website portals.
Only banks can provide business loans
When applying for a business loan, many business owners assume that banks are the only lender to issue a loan. Nevertheless, several other options are available to get extra funds for your business. Hence, it is essential to seek a lender suitable for your needs.
A business loan is for failing businesses only
Most people believe that only businesses experiencing financial difficulties seek additional funding. However, loans are not meant for struggling businesses alone. Most businesses require funds to support growth and expansion plans, which, once completed, frequently have a very positive effect on the business by increasing sales and profitability.
Rather than investing a loan in a failing business, it is preferable to obtain a loan to expand and improve a stable business as it will be wholly directed towards getting profit from the business.
Small businesses are not eligible for a business loan
The fact that the business is small to medium does not mean you cannot apply for business or larger loans. From a financial standpoint, let small businesses apply for loans as it allows traditional lenders like banks to make more money over time.
However, you must demonstrate that you can repay the debt if you are a small business seeking a larger loan. You ought to have evidence to show your bank that you are in an excellent financial situation. Some lenders may also want to see all your company’s money projections and objectives. This will be utilized to help them in making their decision.
Strong credit history is a must for a business loan
Another common misconception about business loans is that you can only get a loan with perfect credit. You are more likely to get a loan if you have a high credit score, but a low score doesn’t mean you won’t get one.
As a part of your loan application process, lenders may investigate the business owner’s personal credit history to ascertain reliability. The credit score is only one factor among many, so don’t let it deter you from applying for a business loan.
Collateral is required for a business loan
Getting collateral might be the most nerve-wracking part of getting a business loan for owners of small businesses. Since you need capital to take out the loan, locking up a significant portion of the capital seems counterproductive. However, not all loans necessitate collateral.
Numerous business loans do not require collateral. These include business credit cards, unsecured lines of credit, and unsecured business loans. The repayment of your loan is entirely up to you. However, all that is required is personal guarantors. The people who signed as guarantors will be responsible for paying back the loan if you cannot. You can repay the individual anytime without shutting down your business, so this is a good substitution for you.
What Vidalia offers
If you base your decisions on misconceptions about business loans, you may miss out on favorable financing opportunities to help your business grow. Having busted these myths about business loans must have given you an idea of why business loans are such a great source of financing. In choosing a business loan, you should consider the terms, tenure, and interest rate to get the best loan suitable for your needs. Then, all you need to do is establish your creditworthiness.
And if you are looking for a financial institution to provide an easy and affordable business loan, apply with Vidalia Lending. We can provide you with business loans that are fit for your needs. We offer you a streamlined loan application process and loans with competitive interest rates. Apply now and click here to learn more.