Some common misconceptions people have about the processes involved in SME loans.
1. Funding for New/Small Businesses is Not Available
Most often than not startups and small businesses seek funding from venture capitalists or family and assume applying for a business loan requires more years or a great business credit score. Securing a working capital loan or seed money may involve more examination into your personal finances than other types of loans. Your personal credit score will be an essential part of the application. You may also be faced with less favorable rates than you would receive as an established business. But if you’re determined to seeking funding and open to the necessary conditions, securing a loan for your brand new business is not only possible but has also become much easier.
2. A Perfect Credit Score is a Must
Traditionally if you had a less than perfect credit score securing a business loan would seem next to impossible. Fortunately, growth in the alternative lending sector has led to a larger spectrum of factors being considered in the loan approval process. Many lenders will now give look at your company’s revenue history, cash flow statement and other financial documents in determining your loan eligibility. This information often paints a very different picture of a business and its owner’s financial standing than what a credit score alone can convey.
3. Approval and Disbursement Take Very Long
One of the most common questions asked by business owners when applying for funding is, “How soon can I get some cash?” A Common misconception is that getting approved for a business loan can take weeks or even months, but that information is pretty outdated. With new online loan applications, an organized business owner can complete his application in less than an hour, and it can be reviewed and approved within 48 hours of submission. Many lenders can even offer cash in hand in as little as two days. Don’t let the long approval process intimidate you from seeking an unsecured business loan.
4.Online lenders are cheats with exorbitant rates
The online alternative lending market is fairly new, and most people are wary of new things. Most alternative lenders operating online offer single-digit interest rates. Online lenders regularly consider a wide variety of borrower credentials outside of just the traditional credit report and score. Business owners who were turned down by their bank can frequently find the funding they need online.
5. Only Failing Businesses Apply For Loans
All businesses can apply for small business financing. Generally, the successful and huge ones have access to bank funding. However, it is the SMEs who get rejected at the big institutions. However, with a digital lending platform, they can get quick boosts of external financing to help with their future expansion and development. Loans types like working capital loans, equipment financing and invoice discounting exist to help growing companies support their plans of expansion and help them get out of a cash crunch in periods of low sales. Thus they get fast access to money at the right time to help them optimize their sales and take the business to the next level.