5 common business loan related myths
Business loans are hard to get in the past days; so much of paperwork, many visits to banks at regular intervals and no guarantee that the loan will be approved. But this is not the case in the 21st century. As long as the idea is good and if you make lenders believe that the plan works and bring profits, they are ready to invest in the company. While some achieve their dreams of starting a company and successfully running well and some people believe that loans are still tough to obtain. Well, to clarify the confusion let’s discuss some common myths on business loans and the reality of them.
- Start-ups don’t get business loans.
One crazy idea which is useful for people and is capable to make huge profits is enough for establishing a start-up company. An individual won’t want to risk in the field of business unless he/she believes that the idea is life-changing. It’s a myth that startups won’t get business loans. Along with the collaterals, banks will consider the plan and if they are convinced it would make profits and clear the debt, then loans are sanctioned within few days.
- A good CIBIL score is a must for loans.
First and foremost thing to be noted is that business loans are not solely dependent on CIBIL score. They consider many other factors before processing the loan. A good score is advantageous but CIBIL score is not the deciding factor. Individuals or team should submit the paper-work of how the start-up will earn, their estimated monthly, yearly earnings and so on. If at all, the idea looks practical, CIBIL score is least considered for giving loans and loans are approved within a short period of time.
- The only source of funding is
Gone are the days where only banks can provide funds for business. Nowadays, funds can be generated in a variety of ways. Crowdfunding and Angel Investing are some of the types. You share your idea with a business plan in both crowdfunding and Angel Investing websites and if the idea is really worth it, funds are sent by the people in the sites. The only source of funding is a bank is completely a myth.
- Loan approval takes more time.
10 to 15 years back, loan approvals used to take time but nowadays everything happens online. If all documents are right and if the business proposal is worth, then within next day you will have your money to start with. Loan approval takes more time is a myth and loan is approved only if the idea is practical enough to be successful.
- No loans for small amounts.
This is a common doubt in every individual that small amounts will not get business loans. But this is false. Funds can be raised irrespective of the requirement. As a matter of fact, small amounts will be processed quicker than large amounts.
Funds can be raised easily with various methods and money is not a problem for a startup. So, establishing a start-up is easy but first few months it will be a challenge. It is better to prepare a long-term plan before starting the business.