5 Myths About Business Lending Debunked
If you are an entrepreneur, you know how important credit is to your business. It is the lifeline of your venture because it gives you access to the capital you need to purchase inventory, pay for your day to day expenses, expand, or even hire additional employees. You will also have additional cash on hand to help you operate your business until it breaks even.
In the quest to get funding for your business, you will stumble on misinformation that will discourage you from pursuing business funding. The internet is full of advice on how you can access credit and it’s upon you to carry out due diligence and choose what to believe in.
Below are some myths that shouldn’t discourage you from securing funding for your business:
Small startups don’t qualify for funding
You probably have heard this myth so many times. You are a small business and what you want is to get off the ground. How do you access funding without any credit history or a good credit score? Well, many financial institutions will consider your business a high risk and may not want to lend you their money.
Venture capitals may be the best alternative in such a scenario but is it the only option? There are several lenders who are willing to fund startups with little or no track record in business. You don’t have to be an established business to receive funding. These lenders are willing to work with you to grow your business. Your potential lender will carefully scrutinize your personal finances instead of your business records to see if you are eligible. The interest rates charged may also be unfavorable compared to that charged on established businesses. You only have to be open to some conditions to enable you to access the funds to grow.
Loan approval takes a long time
A business has needs and some of these needs are short term and require immediate solutions. The dilemma many business owners have is that their loan applications may take forever to be accepted. This belief is an outdated myth that should not deter you from seeking funding. There are several online lenders that will approve your request in less than 24 hours. You only have to present your information in an organized manner and they will verify your application immediately. This means you will receive funding faster than you think.
Many borrowers however still prefer taking a long time to dig into all the records about your business before approving you for a loan. You only have to choose what works for you and pursue it.
Online lending market is full of cons with unreasonable rates
While this belief may be true, it should not be used to generalize the entire market. There are a lot of factors that are used to calculate your interest rates and this should not discourage you from pursuing this form of business lending. Online lenders will use your business credentials and not only your credit records while making their decisions to approve you. You will be surprised that some have the best interest rates and that those businesses that attract higher rates are considered high-risk businesses.
If you have been turned down by your traditional bank, consider funding from an online lender. Always do your research about your potential lender before signing the deal to be on the safe side.
Loan approval is determined using unrealistic and heartless criteria
While technology is a good thing, it has replaced a lot of face to face business deals. Gone are the days you would walk into a bank and negotiate with your loan officer one on one. Many business owners feel that lenders are unrealistic in deciding whether you qualify for a loan or not. All you get is a no or yes without any explanations.
All is not lost and you can still explain to your loan officer how you plan to use the funds and repay it. your potential lender has to be convinced that you will make timely repayments and pay off your debt in full. Your financial documents should, therefore, paint a good picture about your business and its ability to repay your loan.
Your credit score is all that matters
Having a high credit score will definitely make you access funding much easier. It is, however, not the only criteria used to assess your eligibility for funding. potential lenders will use cash flow statements, your firm’s revenue records and other financial statements to approve your loan. These documents will give a true picture about your business apart from using your credit score only.
There are numerous options that you can use to fund your business. Don’t allow the above myths to discourage you from seeking business lending. Work on growing your credit worthiness and open up a lot of financial opportunities for your business.
Call us today and let us help you understand what lenders use to give out business loans.