Anything in excess is harmful, and the same applies to the amount of information small businesses find about loans on the internet. The extensive information available online has both good and bad aspects, which can cloud a business owner’s judgment in distinguishing between myth and fact.
In a bid to help small business entrepreneurs to get few things straight, here are some of the myth busters related to small business lending.
Myth 1: A Business bhas to be few years old to get a loan – A start-up entrepreneur might be under the impression that small business loan funding is out of reach. But, this is not true as lenders often extend loans to start-ups, though after more scrutiny than a regular business loan. Startup owner need to have a reasonable personal credit score in order to qualify for a loan but one thing can be said with surety, and that is that getting a loan for a new business is never impossible.
Myth 2: Approval takes ages – The notion that small business loan approval takes months to process and could put an entrepreneur in a stressed situation during peak times of need is an outdated myth. With the implementation of smart analytics, online lenders and even a few banks are disbursing loans within 24 hours.
Myth 3: Credit score matters the most – Unlike traditional banks, alternative lenders have designed different rules to evaluate credit scores for businesses. For instance, alternative lenders factor in a company’s cash flow statement, revenue history and other financial documents over personal credit score to assess the creditworthiness. This means that the conventional approach no longer matters, and those owners with a lower personal score can still get a loan approved.
Myth 4: Online lending is fake – Unfortunately, reckless lending practices by some online lenders have built a bad rap for the whole industry. But, the misconceptions formed about online lending are not true as there are many reputable online lenders that are willing to extend loans at a reasonable rate, which could even be as low as single digit interest rates.