Time and money are needed to grow your business. A loan can be a great tool to maintain growth and boost investment during periods of low cash flow.
There are however, several myths about small business loans that may make business owners hesitant to apply for financing. You can decide whether a small-business loan is for you by separating fact from fiction.
Myth No. 1: If you are declined by one bank, you won’t be approved anywhere else
This is a common myth about small business loans. Small business owners can feel intimidated by the rigorous loan application process of traditional banks. According to the Federal Reserve’s 2017 Small Business Credit Survey 13% of small business owners needing financing have not applied for a bank loan because they are afraid of rejection.
If you don’t qualify for a bank loan, that doesn’t necessarily mean your business is out of luck. Online lenders and marketplaces offer different guidelines for application and approval, so they can offer capital to those business owners that don’t meet the requirements to get a bank loan.
Myth #2: You should only apply for a business loan if you need a large amount of capital
This myth about small business loans is false. Not every business requires millions of dollars for growth. According to the Federal Reserve report, 55% of small businesses applied for funding under $100,000.
Small business loans are available to meet almost any requirement, no matter how small or large. Businesses should determine how much cash they need to grow and how much monthly repayment they can afford. It is easier to manage your cash flow and repayments if you only borrow what you really need.
Myth #3: To get approved, you need perfect credit and a long business history
This may be the case if you are pursuing a small business loan from your bank. However, this is not always true with online lenders or marketplaces. Online lenders often offer special loans for startup or business owners with bad credit. Marketplaces also allow you to search through different types of loans in order to find the best one.
It is important to improve your credit score and your business’ revenue. The better your business and credit profile is, the more favorable the terms of the loan you are likely to be eligible for.
Myth #4: Small business loans are restricted in their use
A popular myth about small business loans is that you are restricted in what you can do. Most lenders will not restrict how you allocate your small business loan. You could, for example, use a small business loan to:
Purchase new equipment including software and appliances
* Create a new line of products or increase your stock
Renovation or expansion of your office space
Employers or payroll cover
Tax bill for business: Pay the annual tax bill
You have unlimited options. The loan you select should fit your budget and business needs. These small business loan myths shouldn’t stop you from obtaining the working capital that you need.
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