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Starting a new firm, or simply progressing to the next step of expansion, can be a stressful thing. This isn’t helpful when you’re searching for extra funds and may have certain misconceptions regarding business loans that aren’t true. Let’s look at the top five myths and misunderstandings to clarify some of them, so you have all the information you need, before choosing which loan is ideal for your company.
Myth 1: Only banks can provide business loans
Loans are frequently associated with high-street banks. Again, this is not true. This is something that many people, especially new business owners, are unaware of that there are alternatives to banks when it comes to securing a business loan. There are various other lenders who specialize in lending to small businesses.
Although banks were once the preferred lender, there are now a variety of other options available. And, while many banks offer excellent business loan rates, there are still alternative lenders who may customize a loan to your specific needs.
Myth 2: Small businesses cannot apply for larger loans
The fact that the company is a small to medium-sized business does not restrict it from approaching a lender for a larger loan. When looking at it from a financial perspective, it makes sense because even traditional lenders like banks want to lend larger amounts because it makes them more money in the long term.
However, if you are a small business looking for a larger loan, you must demonstrate that you will be able to repay the debt. You should have proof ready to show your lender that you are in a good financial position to repay the loan.
Many lenders may also want to see a detailed company plan which includes all cash projections and goals. This will be used to assist them in making their final decision.
Myth 3: If you ask for too much money, you will get rejected
The amount of money you request has no bearing on your chances of being approved, and, contrary to popular opinion, lenders prefer to give larger loans. Before you start the application process, you should determine how much money you’ll need in total and how much you can afford to pay back during loan repayment.
Just keep in mind that the lender will need to evaluate your cash flow and be sure that you will be able to make your payments.
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Myth 4: Loan applications are time-consuming
Due to the rise in online financial technologies, the procedure of applying for a loan has been simplified & the time taken has been reduced drastically. With access to the internet, a professional lending specialist would have a clear and transparent website with information on the many loans available as well as contact information.
When asking for a loan, you’ll need to supply a lot of detailed information about your company, but the procedure isn’t nearly as long and complicated as you would expect. Applications can now be done quickly and conveniently online.
Many websites allow you to check pre-approved loans and provide you with a list of eligible lenders as well as their rates. You’ll also find that alternative lenders approve loans much more quickly than traditional banks.
Myth 5: Only failing businesses need a loan
Some people think of loans as the last option when they’re in financial problems, but they’re a method to invest in your company. A business loan can help you make advances that you wouldn’t be able to make without the additional cash, much like a mortgage can help you buy the property you want.
There are a variety of reasons why a successful firm can want a business loan, including the necessity for new equipment or technology, as well as the desire to offer a new product or service. It’s not an indication of a failing company.
Conclusion
What matters is whether you can establish that you are a reliable borrower as a company. Evidencing why the loan is needed, the effect it will have on the business’s returns, and repayment rates are all important. It all comes down to making sure that cash flow can handle loan payments, and firms should only ask for as much money as they require.
