Few Common Myths About Business Loans

Introduction

Business loans are always the preferred option of every business person nowadays. Rather than dipping into personal funds, they prefer business loans. Whether to meet day-to-day office expenses or for business expansion, a business loan is a one-stop solution.

The business loan in India is designed especially for manufacturers, self-employed, traders, entrepreneurs, and many other business entities so that they meet working capital requirements with ease.

A business loan can be of two types: secured and unsecured business loans. If opting for a secured business loan, you need collateral against the secured business loan. Without the provision of collateral, you can go with unsecured business loans.

Nonetheless, there are certain myths about business loans that the article demystifies. 

The following clarifies the most common myths concerning business loans.

Myth 1

A good credit score to apply for a business loan

Many entrepreneurs avoid applying for business loans because of the myth that they should have a good and clean credit history. There is no denying that if your credit score is good, the chances of getting a business loan at the best interest rate increase. However, having no credit history does not mean the lender will not accept the loan application. The credit score criteria vary on the type of business loan sought. The loan approval process for small-ticket business loans is quite generous, and a good credit history is a cherry on the cake.

Myth 2

A time-consuming process

Previously, business loan applications took months to get approved. With the advent of FinTech organizations, it is a myth today. In the world of FinTech, applying for a business loan is no longer a time-consuming process. 

For a business loan online, fill in the application, upload documents, and click to apply. There are efficient financial institution web portals that offer business loans quickly and with minimal effort. You can compare the interest rates various lenders offer for online business loans.

Online business loans are available faster than traditional business loans—no more waiting weeks or months for a business loan approval.

Myth 3

Collaterals are mandatory for business loans

Arranging collateral is the most challenging part for small business owners, especially at the initial stage of starting a business. A small business person facing a fund crunch and unable to place any collateral against a business loan cannot apply. 

As mentioned earlier, this is a myth. There are two types of business loans in India: secured and unsecured business loans. An unsecured business loan includes merchant cash advances, business credit cards, and a business line of credit for which a business may not necessarily submit any collateral. 

Business loans without collaterals get approved after checking the financial credibility and business status. So, if financial credibility and business standing are okay, borrowers can apply for collateral-free business loans.

Myth 4

Big-ticket business loans get approved

The myth that only people seeking large amounts can apply for business loans is untrue today. Previously, traditional banks preferred applicants who needed large-ticket business loans. But with the advent of FinTech organizations, people may apply for small-ticket business loans with affordable interest rates. Online, there are many financial institutions available that are considered micro-loan providers, like Flexiloans.

Myth 5

Business loans are only available from banks

With the advent of FinTechs, the financial market has revolutionized to a great extent. Many FinTech organizations, including NBFCS, may be approached from the comfort of your home. Now a business no longer has only one option to apply for a business loan; NBFCs also join the line. Enjoy trouble-free business loan disbursals with minimal documentation. Online business loans have made financial assistance relatively easier. Before applying for a loan, you can also check eligibility to avoid facing loan rejections. Previously, it was challenging to check business loan eligibility at the initial stage.

Myth 6

A failing business requires a business loan

It is another common myth about business loans. Many small and medium-sized entrepreneurs use a business loan to meet financial contingencies as the last option. They seldom apply for a business loan to fulfill the working capital requirements. There are other reasons to apply for a business loan, like buying new equipment, updating infrastructure, or planning to expand a business.

Myth 7

All business loans are similar

A typical business loan misconception. There are many reasons to apply for a business loan, from recruitment to running marketing campaigns. However, all business loans are not the same.

There are different types of business loans, such as the following.

• Term loan– It is financial assistance offered for a lump sum loan under particular terms and conditions.
• Working Capital loans– A loan applied by small or large business owners to meet the working capital requirement of the business, like buying or upgrading machinery, staff recruitment, etc.
• Commercial loans– These are short-term loans borrowed to meet immediate financial requirements.
• Merchant Cash Advance loan– A merchant cash advance loan is also short-term financial assistance where merchants apply for advance cash based on business sales.

You can apply for any according to your business needs.

Bottom line

A business loan is best if you plan to expand your business and/or fall short of funds for business operations. Fulfill all your business requirements easily at the best business loan interest rate. 

Apply for a business loan with Flexiloan and fuel business growth without concerns about funds. The best part is that you are only required to repay the loan and do not need to share profits, unlike angel investments. 

Online business or MSME loans are among the most popular when looking for financial assistance for a business. Whether for the working capital requirement or business expansion. Flexiloans offers financial aid at a click that too at the best interest rates. You may also avail of tax benefits with a business loan.