Business Loan is a great alternative to grow and expand your business when you have an effective business plan but a shortage of necessary funds obstructs your way. In such cases, one can right away go to a bank or visit online lending marketplaces to apply for a Business Loan.
Online Business Loans lets you obtain funds low-interest rates instantly and without any hassle. You can repay the loan conveniently in equated monthly instalments (EMIs).
However, many people still avoid taking Business Loans due to some myths associated with them.
Here are 10 such myths about Business Loans that you must be aware of:
- Obtaining a small Business Loan is tough
Similar to other methods of funding, getting a Business Loan is all about groundwork. Making sure your books are true and you uphold the backup liquidity to boost the creditor that you’ll be able to deal with your liability in time will lead to achievement.
- One cannot get a small amount Business Loan
This is one of the biggest myths. Only just because the loan is a Business Loan that doesn’t actually mean that the loan amount must be in crores. You can apply for any loan amount as per your necessity. Today our government has already started to endorse Entrepreneurship and Small Businesses where you can procure small Business Loans, startup loans and Business Loans for women at relatively lower interest rates. Whether the business is large or small it doesn’t matter. You can also obtain the loan straightforward once you meet the eligibility criteria.
- A Personal Loan is better than a Business Loan
Although Personal Loans have a quick processing, but the maximum loan amount that you can obtain under these loans is lesser than that of Business Loans. Also, the Personal Loan is procured in the person’s name and not in the company/business’ name and therefore the credit record of an individual can have a drastic effect on Personal Loans. You can claim tax benefits on Business Loans whereas Personal Loans don’t offer these benefits. Also, you don’t get moratorium period for Personal Loan repayment like Business Loans.
- A good credit score is always mandatory
It is also a common misunderstanding that obtaining a Business Loan is quite tough. If you are eligible for the loan you can absolutely procure it. The person must have a good credit score and also all the essential documents and a flawless business plan along with the roadmap to use the loan amount. However, even if your credit score is not impressive, you can still Get a secured Business Loan against your property or any other assets.
- You must own a property to get a Business Loan
This is a myth! You don’t have to pledge any collateral to get an unsecured Business Loan, not even your property. Unsecured Business Loans are approved only on the basis of your business financial records, credit score (700 and above), and repayment capacity.
- The most important factor to look for in a Business Loan is the interest rate
Although the interest rate is one of the most important factors to consider while going for a business financing but it is not the only thing one should look for. There are many another points, which you should consider while selecting a lender for your Business Loan. Some of those factors are processing fees, processing time, other taxes and charges, the reputation of the lender, the tenure at which you are getting the loan, and so on. Always consider all these factors along with the interest rate to choose your lender.
- It is better to use personal savings instead of going for a Business Loan
Utilizing your personal savings for business instead of going for a Business Loan is completely risky and unsafe. It might occur that you face forfeiture in your business in this case you will miss your personal savings which was for crisis and future. Thus, the right option to obtain finances for your business is a Business Loan. Making use of one’s personal savings is not ever recommended for establishing a business.
- Only big banks are best to obtain a Business Loan
It is not at all right that only Kotak Mahindra Business Loan or other big banks are perfect for Business Loans. There are various small banks and non-banking financial companies (NBFCs) that offer Business Loans at affordable interest rates and better terms.
- One’s personal credit score will not upset their Business Loan application
For any type of loan, credit score is one of the ways which lenders think through. Your personal credit score exhibits your financial status and previous borrowings and their repayment record. This is a type of guarantee which moneylenders must have while they lend money to any person and even in the case of Business Loan, the applicant’s individual credit score plays an important role.
These were some common myths that people have for Business Loans in India.