Business loans are an excellent way to finance your business needs. Instead of dipping into your own funds or business savings, you can apply for a business loan. Whether you’re looking to comfortably meet day-to-day expenses or planning on expanding your operations, a business loan is just what you need.
However, we understand that there might be certain myths on business loans that might have deterred you until now. But that’s all in the past. Because here, we’ll be busting the top six myths about business loans so that you have all the information!
Myths about business loan
1. Business loans are time-consuming
Initially, loan applications would take months to get approved. One would have to keep taking trips to their financial institution hoping to hear good news. And the number of documents required would only add to the stress. But that’s no longer the case.
The time-consuming process has now become a myth on business loans. With the internet and the advancement of technology, you can study interest rates and tenures and even apply for a loan online. With efficient website portals, you can apply for business loans online and receive confirmation in days! Now, business loans are granted quickly, with minimal effort.
2. You must have a strong credit history
Another common business loan misconception is that you need an impeccable credit score to be able to apply for a loan. While having a strong credit score increases your chances of getting a loan, a low score doesn’t eliminate them.
As part of studying your loan application, financial institutions analyse the business’s and the entrepreneur’s personal credit history to ascertain creditworthiness. But it is only one factor among many. So, don’t let a low credit score hold you back from applying for a business loan.
3. Collateral is imperative
This could not be farther from the truth. Many financial institutions offer business loans without asking for any collateral. Many businesses do not have security to offer, as they might be at a nascent stage of their operations. But these are also the ones that need these loans the most.
Unsecured business loans for start-ups are common. In these cases, the business owner’s guarantee replaces collateral. And any default in repayment would make the business owner personally liable.
4. Business loans are only sanctioned for large amounts
This is another common myth about business loans that misleads many. While financial institutions often prefer large loan amounts, as they’ll receive a more significant sum in the long run, they do not deny small loans.
Subject to your creditworthiness and business documents, you could get a small business loan approved quickly. Furthermore, many NBFCs and micro-loan providers specialise in providing unsecured business loans for start-ups.
So, if you’re looking for a small loan to meet daily expenses, don’t be discouraged because you can get one quickly!
5. You must have a business to apply for a business loan
To get a business loan, you must have a business, right? Wrong! This myth deters many entrepreneurs from applying for a business loan. Many financial institutions provide unsecured business loans for start-ups to help them get on their feet, but they also give loans to entrepreneurs to start their businesses.
In such cases, there are no company documents to submit. Instead, they must submit their business plan, revenue model and the like to convince the financial institution of their ability to repay the loan.
And especially today, as India witnesses an unforeseen rise in start-ups, getting a business loan without a business is possible.
6. All business loans are the same
This myth is one of the most widely held business loan misconceptions. You might need a business loan for various reasons, from marketing campaigns to paying salaries to new hires. And to meet these needs, you can apply for different business loans, depending on which one suits you best.
Let’s look at some of the types of business loans.
- Term loan (secured and unsecured)
- Commercial real estate finance
You can choose the type of business loan according to your need for the loan.
Wrapping Up
Making decisions based on business loan misconceptions can cost you a conducive financing opportunity. But, having busted these myths on business loans must have given you a good idea about these and why they’re an excellent financing source.
Always compare different business loans based on terms, tenure, amount, and interest rate to get the best the market has to offer. After that, all you need to do is establish your creditworthiness, and you’re all set.
And if you’re looking for a reliable financial institution for a business loan, apply with Tata Capital. With attractive interest rates and fast loan clearance, your business needs are met in no time. For more details, visit the Tata Capital website today!
17 November 2022
5 mins read
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