We live in a world where the majority of people hold myth as truth and truth as a myth. When this happens in the business world, the uniformed bear the grunt of the whole problem. The backlash results in people suffering from setbacks, stagnation, or the utter doom of their businesses. Why suffer from loss when it is entirely preventable?
In this post, we share with you five (5) common misconceptions about getting a business loan. Why did we choose to discuss misconceptions? Well, as an old African proverb says, if you want to know the truth about a matter, get to know all that’s not true about it. So, without further ado, let’s dive deep into the subject at hand.
Business loans are taken from financial institutions, credit unions, and banks to increase efficiency and profitability. Entrepreneurs who ignore business loans while their businesses collapse or remain stagnant have dozens of excuses to offer. Most of the excuses originate from the inability of business owners to separate fact from fiction. For example, some people give excuses such as “the process of obtaining it is too difficult,” “my business is too small for obtaining a loan,” or “I don’t need a loan because I do not have a small-scale business” and so on. All these and more are myths that have held down many business owners from succeeding as they hoped.
Below are five common misconceptions about getting a business loan –
- All Loan Applications Require High-Value Collaterals
- Loans Are for Failing Business Only
- Only Banks Give Loans
- Applying for Loans is Time Consuming
- The Higher You Demand, The More Difficult Your Approval
Misconception #1: All Loan Applications Require High-Value Collaterals
For small business owners, obtaining collateral could be the scariest thing about taking a business loan. After all, you want to take the loan because you need capital, so locking up a significant part of the capital seems to defeat the purpose. It’s true that many business loans require collateral that is equivalent to your loan, and if you are not able to refund it, your money goes for it.
But not all loans require collaterals. There are a lot of business loans that have no collateral as a requirement. These include unsecured business loans as well as unsecured lines of credit and business credit cards. You will personally be responsible for paying back your loan. But all you have to do is get personal guarantors. In the event that you are unable to pay back the loan, the people who signed as guarantors on your behalf will have to pay back out of their own pockets. This is a creditable substitution for you, as you can pay back the individual at any time without having to shut down your business. At Lendigo, we DO NOT require collateral for our business loans.
Misconception #2: Loans Are for Failing Business Only
Indeed, a failing business needs a loan than any other business, especially when bootstrapping or self-funding is no longer sufficient to keep the organization going, and all other financial sources have failed. Sometimes, a business loan becomes imperative to save a business from dying. However, loans are not meant for struggling businesses alone. There are many reasons why a very successful business may need a business loan. For example, such a business may need to take their business to the next level or expand its business terrain. They may also want to get more sophisticated and modern equipment or introduce a new product.
Preferably, it is better to acquire a loan to expand and improve a stable business than to invest a loan in a dying business. There might be debts to pay and taxes to settle, which may take a larger portion of the loan in a dying business. Whereas, in a stable business, the loan is wholly directed towards getting profit from the business.
Misconception #3: Only Banks Give Loans
It is worth it to know that there are a lot of other institutions that give loans to businesses. In essence, this means that you now have a range of choices to pick from, depending on the nature of the financial institution and the purpose of the loan. Some of these financial institutions grant easy access to loans, while they do not require collateral. For example, online lenders like Lendigo give loans to small businesses other than banks.
Misconception #4: Applying for Loans is Time Consuming
Since the advent of technology, things have become considerably easier day by day. The long queue in banking halls and customer care units have almost vanished into thin air. Pages of paper documents usually filled all day long at financial institutions can now be filled as a digital document at any time and anywhere with your smartphone or laptop.
Banks and Lender have taken up mobile and web tools to make acquiring loans easier than before. These technologies allow remote access to almost everything pertaining to the loan application. This includes monitoring the progress and making necessary repayments using electronic money transfer platforms. Therefore, all the factors that made applying for a business loan tedious have been substituted and made faster by technology. Many lenders are specialized in funding business owners quickly when they need it without allowing weeks or months of waiting through a specialized system.
Misconception #5: The Higher You Demand, The More Difficult Your Approval
When applying for loans, there are major factors you should consider. You may have come across some of them while reading this article. But the belief that the higher you demand, the more difficult your approval is a great misconception. Business owners should demand the exact amount of money they need to grow their business. This is because it has no adverse effect on whether the loan will be approved or not.
Interestingly, higher loans favor the financial institution in the long run. So, don’t hesitate to demand the exact amount you need, for it is not a factor to consider. You should rather consider how much you can afford to pay back at the time required, how much do you need to grow your business
In conclusion, I believe some of your misconceptions about getting a business loan has been cleared. Now that you know the facts, if you need a business loan, get it. You can get a loan from us if you prefer by checking if your business is eligible.