Getting a small business loan can be complicated, but don't believe everything you hear about the process. Here are seven small business loan myths you should think twice about:Myth No. 1: Getting a small business loan is the hardest thing you'll ever have to do.
While obtaining a loan for your small business is no easy feat, it doesn't have to be an insurmountable trial. Small business lending experts agree that you can best avoid such trouble by preparing for the challenges that applying for a small business loan may present. While there are challenges, a lot of the frustration around obtaining small business financing can be eased by doing your due diligence. Be prepared and have all your documents ready to present to lenders.
Myth No. 2: You have to have perfect credit to get a small business loan.
Good news for those who think that bad personal credit means never owning or expanding a business. While low credit scores might have been a non-starter in years past, today's lending environment is actually more open to subpar credit ratings than ever before. While traditional banks may be restrictive when it comes to obtaining credit, there are alternative options.
Alternative lenders tend to base lending decisions on the financial realities of a business rather than the financial history of business owners. Specifically alternative lenders take a close look at business performance, industry type, time in business and cash flow before handing out a loan.
Myth No. 3: The best way to obtain a loan for my business is through a bank.
Think your bank is the best (or only) place to apply for a loan? Think again. Traditional lending institutions have been a mainstay of small business funding for many decades, and still are, in some industries. But they are not the only places (or necessarily the best places) to turn to for a loan.
For business owners looking to borrow a relatively small sum (between $5,000 and $250,000), getting a bank loan is likely to be more trouble than it's worth. Bank loans may still be a great option for business owners who need to borrow a significant chunk of cash, over a long period, and still get a low interest rate. But make sure you fall under their categories before applying through a bank.
Getting a loan through an alternative lending source is usually much quicker than obtaining a bank loan. With a simple application, some bank statements, photo ID and proof of ownership, business owners can have cash in hand in as little as seven days.
Myth No. 4: The worst way to obtain a loan for my business is through a bank.