Business Loan is the best option to grow your business when you have a proper plan to take your business to the peak but lack the required capital. In cases like this one can directly go to a bank and can apply for a business loan. Business loan is considered best monetary support for one business as here you can get money easily that too on low interest rates. They don’t ask for any profit sharing as investors do. You can repay the loan easily by paying monthly EMIs. Despite of all these benefits many people don’t go for a business loan as they have many Myths related to business loan. In this article we will discuss these Business loan myths and tell you the facts that you should know.
9 Business Loan Myths Busted
- One won’t get a loan when the loan amount required is small
Only because the loan is a business loan that doesn’t means that the loan amount should be in crores. This is a myth. You can apply for any loan amount that you need. Nowadays our government has taken many steps to promote Entrepreneurship and Small Businesses where you can get small business loans, business startup loans and business loans for women at comparatively lower interest rates. Whether the business is big or small it doesn’t matter. You can get the loan easily once you fulfill all the eligibility criteria.
- A Personal Loan is better option than a Business Loan
Even though personal loans have a faster processing, but the maximum loan amount that can be availed is much lower than that of a business loan and the interest rates on personal loans can be higher. Also the personal loan is availed in the person’s name and not in the company/business’ name and hence affects the credit history of the individual person instead of helping build the business’ credit history. In the unwanted case of business hitting a low, the individual credit record will get severely hurt which will be very tough to recover from. Availing a business loan instead of a personal loan helps keep the business and personal finances separate, and the loan can be shown in the business’ records while filing the taxes.
- Getting a Business Loan is Very Difficult
It is also a common misconception that getting a business loan is very difficult. If you are eligible for the loan you can definitely get it. All you need to have is a good credit score along with all the required documents and a perfect business plan along with the roadmap to utilize the loan amount. You can get a business loan for everything from purchasing inventory to pay your staff. It is not at all difficult task. If you want your loan to be disbursed quickly choose your lender wisely after a complete research for the lower interest rates and less processing time.
- Loan Against Property is the Only Option to get a Business Loan
It is not always true that a business loan is a loan against property. For many small and new business one doesn’t need to keep their property as a collateral. Even our Ministry of Finance has launched schemes under which new businesses can get a loan without any collateral property. But there are certain terms and conditions which need to followed and satisfied for availing the loan.
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- To use Personal Savings instead of going for a Business Loan
Using your personal savings for business instead of going for a business loan is totally unwise ad risky too. It may happen that you face a loss in your business in this case you will lose your personal savings which was for emergency and future. So the best option to get fund for your business is a business loan. Using one’s personal savings is never ever advised is a business.
- Only Big Banks are Best for a Business Loans
It is not at all true that only big banks are best for business loans. There are many small banks and NBFC that provides you business loan at the same rate or in some cases lower than any big banks. It may be true that big banks can provide you more options even for a business loan depending on your loan amount and eligibility but that doesn’t mean that you can’t go with small banks and financial organisations for a business loan.
- One’s Personal Credit Score will not Affect their Business Loan Application
For any type of lending, Credit Score is one of the thing which lenders consider. Your personal credit score shows your financial status and past borrowings and their repayments. This is a kind of assurance which lenders need to have while they lead to anyone and even in the case of business loan it has the same importance.
- You need to have a Perfect Credit Score for Availing a Business Loan
To have a good credit score is one of the important thing needed to have any kind of loan. But is not always true that you can’t get a loan if you have a not too good credit score. Some of the lenders may offer you a business loan but that would be on a high interest rate as compared to that of a person having good credit score. As in this case lenders are at more risk as compared to that of other borrowers.
- The most important factor you should look for in a business loan is the Interest rate.
Although interest rate is one of the important factor to consider while one go for a business loan but it is not the only thing one should look for. There are many other point which one should consider while choosing a lender for their business loan. Some of those factors are processing fees, processing time, other taxes and charges, reputation of the lender, the tenure at which you are getting the loan. Always consider all these factors along with the interest rate to choose your lender. If you do so you can enjoy a hassle free and smooth borrowing.