The modern entrepreneur looking for funding has a lot of advantages their predecessors didn’t thanks to the wealth of information online. Despite all the genuine advice though, there are still plenty of myths about small business lending. Some businesses are left with a mistaken belief about how eligible for small business loans they really are. It’s time we got to busting those small business lending myths.
It takes forever to get approved
The most common question a business owner in need of money has is wondering when they will get the money. Some people will tell you that it could take months to get funding, but that’s not been the case for a long time. Thanks to online loan applications, you can have your loan applied for in an hour, and approved within 24 hours. It can take a little more time with some lenders, but they are always efficient.
New businesses will never qualify for loans
There is a bit of a startup funding paradox, in which one needs to be established to get funding, but also needs funding to get established. But what if there was a different way? Many entrepreneurs believe that they need to have solid business credit before being able to qualify for loans. However, there are a growing number of lenders offering loans designed specifically for startups. These loans don’t need much – if any – business credit for a business to qualify.
Online lenders are loan sharks and con artists
Listen; we understand that online lending is still a new concept, and people always scrutinise new things. Unfortunately there are a number of online lenders that have behaved like loan sharks and con artists, and it gave the industry a bad name.
The truth is that many alternative lenders offer interest rates in the single digits. If the lender has a higher rate, they generally work with risky borrowers. Online lenders look at more than just the typical credit report and score. Many business owners who fail to secure funding from a bank can find it with an online lender. Just ensure that you do your due diligence on an online lender, much as you would with any other creditor.
Loan officers are only interested in your credit score
This is a myth that comes from the way that banks would traditionally handle loan applications and it could leave business owners feeling like they have no chance of being approved. The good news is that the alternative lending sector has grown, and now more factors are considered during a loan application.
Many online lenders will lend credence to the revenue history of a company, the cash flow statement, and several other financial documents when it comes to deciding who is eligible and who isn’t. This could show them a very different side to your business and financial standing than could be offered by a credit score.
Even so, you should always take steps to improve your credit score before applying for business loans. Make sure you pay your debts on time and are responsible with how you use credit. Don’t forget to regularly check your credit report and make sure it is accurate. Contact reporting agencies to have any mistakes corrected.
A soulless algorithm determines approval
There was a time when an entrepreneur could just walk into a bank and build a relationship with the loan officer and manager. They could be confident that the person they talked to understood everything about their application, including all of the intangible elements. Nowadays, these in-person banking relationships have been replaced by technology and many feel the approval process has been boiled down to a simple, soulless algorithm that says yes or no.
Even though you might have lost the chance to directly interact with your loan officer, the loan process isn’t completely impersonal. Lenders use a wide range of number-based factors on top of the more subjective considerations, such as the business and marketing plan.
What matters most to a lender is that you will be able to pay back the loan. Brush up your business plan, iron out your credit score, and do some research to show the lender you can do just that. You’ll drastically improve your chances of getting a loan that way.