It is not uncommon to hear the people who talk about business loans. 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.
Myths about a business loan
Funding for new or small businesses is not available
- Every year thousands of start-ups are launched, and many of them get shut down in the first 2-3 years itself.
- 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 also consider the
- Business revenue model
- Profitability aspect
- 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 that 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 a long time
- On the contrary, the entire loan process has become much simpler and faster.
- Earlier, one was required the need to visit various banks or other lenders. Follow up the entire process by making repeated trips to the lending institution even after they have submitted the loan application for documentation, etc.
- However, now with online lending platforms that are becoming a popular channel to obtain business loans, the entire process is online and time-saving.
- 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
- Entrepreneurs also think that a higher amount of loan does not get approved.
- On the contrary, the lenders are keener on a lending of higher amounts to the businesses.
- This is because huge loans are more profitable to them in the long run.
- Apply for an amount that will not become a burden on the borrower.
Interest Rate is the Most Critical Factor
- While obtaining a loan, it is advisable to look for the most lucrative deal.
- However, the borrower should look beyond the interest rate on the loan.
- One should also consider other factors such as
- The loan tenure
- Processing fees
- Pre-payment penalty
- The foreclosure charges, etc. To get maximum benefits of business loans.