It is not uncommon to hear the people who talk about the business loan. However, when they are obtained through the right channel and at the right time, then such kind of loans can lead to positive results for the sustenance and growth of the enterprise. The article below talks about some common myths that many entrepreneurs associate with business loans.
Here are some of the common myths or the misconceptions that many people nurture about business loans and the facts that they overrule them.
- Funding for a New/ Small Businesses is Not Available
Every year thousands of start-ups are launched, and a big number of them are thus forced to shut down in the first 2-3 years itself, owing to the lack of funds. Many of the entrepreneurs think that since they have no credit history, then they are not eligible for getting business loans.
However, as per CIBIL, not having a credit history does not really mean that one cannot get a loan. Lenders thus also consider the business revenue model, profitability aspect and the expertise and the experience of the business owners while they are approving a loan.
- A Perfect Credit Score is a Must
Lenders take the applicants’ credit score into account while they are evaluating a loan application, but it is not the only criteria which they consider. While sanctioning a loan, the lenders also consider other criteria such as the financial situation of the business, the revenue model, and the cash flows. However, a perfect credit score helps to enhance the chances of a great loan deal at the best possible rates.
- Approval and Disbursement Take Very Long
On the contrary, the entire loan process has thus become much simpler and faster. Earlier, one was required need to visit various banks or other lenders and then follow up the entire process by making repeated trips to the lending institution even after they have submitted the loan application for the purpose of documentation, etc. However, now, with the online lending platforms which are becoming a popular channel in order to obtain business loans, the entire process is now online and it is much quicker.
One cannot just apply online, but even they submit all the documents online and they get approved quickly. If all the documents are in order, the funds are disbursed to the applicant’s bank account within a very short time.
- High Amount Loans are Seldom Approved
Many of the small business entrepreneurs believe that the loans of higher amount do not get approved. On the contrary, the lenders are more keen on lending of higher amounts to the businesses. This is thus because huge loans are more profitable to them in the long run. However, when the borrower is seeking a loan, it is advised thus to apply for an amount which thus one can repay comfortably.
- Interest Rate is the Most Critical Factor
When they are obtaining a loan, it is thus natural (and advisable) to look for the most lucrative deal. However, the borrower should do look beyond just the interest rate on the loan. One should also consider other factors such as the loan tenure, the processing fees, the pre-payment penalty, the foreclosure charges, etc. To reap the maximum benefits and then a great loan experience, a holistic approach towards the process of availing a loan is suggested.