Every entrepreneur who wishes to expand his small business has only one major concern that is to provide a strong financial backing to the business. And why not, to turn the dream of having a successful business a reality, adequate funds are a must. The best way to overcome this situation is to look for a financial help in terms of a Business Loan.
A business loan is specially designed to meet the cash requirements of a business in a case of an unexpected expense or just to provide finances to meet the day-to-day expenses. Although business loans are a true savior, many small business owners are confused or reluctant to avail business loan, majorly because of the myths surrounding it.
Only a well-informed person can make an informed decision! Even a little misinformation can lead to the business owner pay a huge price. Let’s take a look at 5 business loan myths that need to be busted.
Loan Approval Takes Forever
Many small business owners are under the impression that loan approval takes forever! They think that filling up the application form in entirety, visiting the lending institution’s office for submitting the form and other required documents, and then the loan approval and disbursement can take infinite time. However, the reality is exactly the opposite.
The lending institutions understand the importance of the availability of funds for the small businesses at the time of need and disburse the loan in as less as just 3 days after the submission of the form and required documents.
Business Loan Requires a Collateral
This is the biggest myth about a business loan that needs to be busted. Gone are the days when a collateral was vital to avail a loan. There is a huge trend of unsecured loans in the market these days. An unsecured loan, or a collateral-free loan, is the one which is issued entirely on the basis of the borrower’s creditworthiness; the borrower is not required to provide any type of collateral. This type of loan is an ideal option for small businesses which are generally not granted a loan by banks due to no collateral. There are many lending institutions that offer unsecured loans at an attractive interest rate.
A pile of Documents is Required
It is also a common misconception that a pile of documents is required while applying for a loan. But the necessary documents to apply for a business loan are as less as just PAN card, last 12-month bank statement, last 2-3 years ITR, address proof, and Aadhar Card. Also, with the online process, borrowers are not even required to visit the lending institution in person, they can simply apply online and focus on the core operations while the application is being processed.
Interest Rate is the Only Important Factor
Many borrowers think that interest rate is the only important thing that they need to consider while taking a business loan. Indeed interest rate is imperative to consider but it is not the only thing to take into account while availing a loan. The other essential considerations include processing fee, other taxes and charges, the tenure of repayment, and reputation of the lender. Additionally, many lending institutions even do not charge any penalty in case of prepayment of the loan. So, it is wise to consider all the aspects and then only apply for a loan to enjoy a hassle-free borrowing.
Credit Score – A Big Fuss
Another myth is to have a good credit score while applying for any kind of loan. There are plenty of loan providing institutions that do not entirely depend on the credit score but have different eligibility criteria. These institutions require the business to be at least 2-3 years old and should be operating successfully. Additionally, many institutions provide different loan offers for small businesses to choose from according to the requirements.
A business loan can be extremely helpful for the growth of a small business. Therefore, it is imperative for the entrepreneur to be well-informed before applying for a business loan. And with all your myths about business loan busted, you can now make a smart choice!