Small Business Loan Myths
When you run a business, there may come a time when you need to explore business loans to expand or take care of unexpected expenses. It is important to know what these loans entail and bust the myths so that you can speed up the process and get the loan you need for your business.
You Need Flawless Credit
There are several business loans that you can look into and even if your credit is subpar, you can find one that fits your needs. Many believe that only conventional banks extend loans to businesses, but this is not true. You can consider alternative finance companies and even things like peer loans. In some cases, your credit score is not even a factor. The first thing you want to do before applying for a loan is get your credit score and a copy of your credit report. Once you have this information, you can determine which loan options you should focus on.
Try Only for Small Amounts
It is widely believed that when you apply for a loan, you should go small. However, the whole point of a loan is to secure the extra money you need, so you want to apply for the amount that you need. While you want to ensure that you are asking for what you need and not a lot of extra money, do not undercut yourself. In fact, many financial institutions are starting to shy away from offering very small loans, so you are actually better off if you go a little bigger.
Focus on the Interest Rate
You certainly want to consider the interest rate, but this should be considered along with the total package. You have to look at things like the repayments terms, total cost of the loan and any restrictions the lender imposes on the loan so that you reap the full benefits.
Only Your Business Plan Matters
While most lenders do want to get a good idea about what you are using the money for, your business plan should not be your primary focus. Lenders will also look at things like your net and gross profits. So, you want to present a good plan, but know it is not the only thing they will consider.
Keep these myths surrounding business loans in mind so that you know what to expect when you apply for one. In addition to these myths, ensure that you choose a lender that is experienced and has a solid reputation.