Are you looking for a profitable funding option for your small business?
Are you worried that your business won’t get funded because you don’t have a flawless credit history?
Having a perfect credit history is a requisite for acquiring a small business loan - that’s just one among the many misconceptions about small business financing. Without having a clear idea about its crucial aspects, you won’t be able to choose the right funding
method, which in turn may cost you your business.
The small-business-financing landscape has witnessed a dramatic change in the last few years. Owing to tighter regulations, high origination costs, and obsolete credit models,
banks are refraining from lending money to small businesses.
You don’t need to worry as this funding gap has given rise to an alternate small-business financing industry, which comprises a plethora of online, nonbank lenders. They use innovative technology, alternative data, and fresh credit models to offer fast and
fair financing to small businesses looking for capital. In fact, the Small Business Administration has made it simpler than ever before for
alternative lenders and banks around the country to lend money to small businesses.
In such a scenario, don’t let myths about small business financing get in your way of availing funds.
It’s time to bust the five biggest myths about small business financing.
1. Approval Process Is Long and Tedious
If you have incurred an enormous and unexpected expense in your business and need quick cash to take care of it, taking out a business loan may be the ultimate solution.
The best thing about it is that with the new online loan applications, a business owner can complete his/her application in less than an hour, and it can be reviewed and approved within 24 hours of submission. Many lenders tend to offer cash in as less as two
days.
Don’t let the fear of a cumbersome approval process hold you back from funding your business.
2. Stringent Funding Qualification Criteria for Startups
One of the biggest misconceptions that needs to be busted is that small business funding process is a quagmire and that a startup cannot qualify for it.
The current times have witnessed an increase in the number of lenders that are specifically offering startup loans that require little or no business credit history to qualify.
There is no denying the fact that applying for a startup loan will involve more scrutiny into your personal finances than in other types of business loans. Chances are that you will receive less favorable rates as compared to other established businesses. However,
if you meet the necessary conditions, you can secure a loan that best fits the needs of your startup.
Also, you should know that the loan approval process isn’t just about your credit score. Your credit score, undoubtedly, holds tremendous importance, though. However, that’s not the only indicator of a healthy business.
Lending sites such as All Business Loans and Small Business Finance tend to base lending decisions on the financial realities of a business rather than the financial history of business owners.
Many lenders now consider the company’s revenue history, cash flow, and other financial documents to play an equally important role in determining the owner’s loan eligibility. Make sure that your loan application is supported with credible financial documents
that speak volumes about your ability to repay the loan.
A professional financial advisor can help you learn more about small business loans and the financial documents that may play a crucial role in acquiring a loan for your business.
3. New Financing Practices Are Unreliable
Being skeptical about new models of business financing is absolutely okay. However, declaring them to be untrustworthy isn’t.
Several lenders operating online these days are offering some of the best and genuine funding deals to business owners today. It is important for you to do your homework. Do your research before signing a contract. Having all the financing knowledge in your
arsenal beforehand will ensure that you are quickly matched with a loan that best fits your business needs.
4. Algorithms Dictate Loan Approvals
We live in the digital age, where technology plays an incredibly humongous role in our lives, even in the financial facet.
However, this doesn’t imply that algorithms and computers decide the fate of a loan application. New lenders are ensuring to maintain a balance between human and algorithmic interaction when it comes to underwriting loans.
Conclusion
Small business financing has come a long way. There’s a sea of information about it online. However, it has its downsides too. Misconceptions and myths related to it may lead entrepreneurs to believe the misinformation and give them a false sense of their own
eligibility. It is, therefore, essential to invest substantial time in researching about the financing option you want to opt for and only then proceed. Doing so will ensure that you don’t lose hope in your funding prospects. This way you will avoid falling
for false information and claims, thereby capitalizing on all lucrative opportunities to secure funding for your business.