Many times when you go for business financing, it becomes tough to separate myths from facts. Many business owners receive a variety of rumors while applying for a business loan in India. It can make a new business owner anxious, and the process can become complicated and intimidating. For each applicant of business loans, the specifics of business vary broadly, so you need to be aware of various myths circulated in the market.
Following is a list of the most widely spread myths regarding the business loan in India.
You should have a perfect credit score:
One of the biggest myths of the business financing world is that entrepreneurs must have a spotless credit history to qualify for even the smallest of business loans. Good credit certainly boosts your odds of getting a loan, but your credit history doesn’t need to be clear to get your loan application noticed.
Your credit score requirements are entirely dependent on the type of business loan you are applying for. Applicants with lower credit scores can also get approval if they are applying for the Small Business Association (SBA) microloans. Note that short-term loans tend to be quite generous with their credit requirements.
It takes months for a business loan to get approved:
When you are starting a business, you can always plan and submit your business loan application before you need the money. But sometimes you need the capital as fast as possible. During these instances, thinking about getting a business loan is out of the question. But this is not true anymore.
Earlier, the only way to achieve business financing was to gather endless records, go to your local bank and wait for weeks or months to get the capital. Nowadays, a small business owner can complete a business loan application for a lot of lenders online in an hour and see the money in a couple of days.
Every business financing option is similar:
Loans vary on different grounds like your credit history, finances, business needs, and plans for the funds. A loan that enables you to buy inventory will come with different terms and conditions than, say, a loan to organize a massive new marketing campaign. Lenders also pay attention to certain risk factors before they lend you money. Their decision depends mainly on your motives for the money you wish to borrow.
The business owner needs to have a track of enough information about the business requirements before entering the process. The applicant should be ready to answer questions about why they want the capital, and how would they put it to good use.
Collateral is a must for getting financed:
A guarantee can be a fearsome part of the borrowing procedure for some lenders. This is because tying up assets as collateral for a loan seems almost self-defeating because you’re taking out a business loan due to a lack of capital in the first place. But it is not true that every kind of loan requires you to offer collateral.
There are many small business loans in India with no collateral requirements, for example, merchant cash advances, unsecured business lines of credit, unsecured business loans and business credit cards. These options don’t require you to put up collateral to get a business loan.
Only a large amount of finance requirement can get approval:
Many small business owners wrongly believe that business financing is only suitable for applicants who require a lot of capital to finance their growth. However, traditional banks tend to incline toward larger loans that are worthy of their investment and time. Still, there are numerous microloan options out there that help small business owners who want more capital than they possess.
It is advised to use a business loan calculator to get a proper estimate of the amount you can receive. If you don’t require a huge loan, there’s no reason you should take one out. There are alternatives for business owners who need smaller amounts of money to fulfill their needs.
The market is full of possibilities, and so is the availability of the best business loan, as per your business requirements. There are a lot of lenders that are looking to invest in firms that can make them believe in themselves. For you to avail of the best business loan in India, you must do proper research, seek expert advice, understand your business requirements, improve your credit history, and make sure to use a business loan calculator. If you come across the business myths as mentioned earlier, do not panic. If you have done proper research, then it is very likely that your application will be accepted.