Acquiring a loan for a small business is a good way to give a kick start to your new business. There are many things to take care of while setting up a new business in the market. Loans help you to fulfill all your needs as an entrepreneur. But there are a lot of myths related to acquiring loans for small businesses in the market. In this article, we have unraveled the facts for you so that you can apply for a loan without any doubt.
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5 Myths About A Small Business Funding
1st Myth: New Businesses can’t qualify for the loan
This is the most common myth among entrepreneurs that they need to have a good business setup of a few years to qualify for the loan. A good credit Business is necessary for qualifying the loan. But this is just a myth.
There are more and more emerging leaders in the markets that lend money for the startup plan. They look into what plan you have and not the credit you have. There are chances that you may receive a little less amount than other established businesses, but it is possible to get a loan for your startup business. You can get a loan through the MSME program, but first, you need to get a msme registration certificate from Udyog aadhar.
2nd Myth: The More Funds you ask for, the less likely you are to get validated for a loan
This is the silliest misconception that prevails in the entrepreneurs that if you ask for a considerable amount for your startup or small business, there are more chances of your application being rejected. In reality, there are no such criteria. Lenders are willing to lend substantial amounts to the right borrower.
That is beneficial for them in the long run, and thus you should never be afraid to ask the amount you want. You just need to have a promising proposal then no one can stop you from getting the loan as you expect.
3rd Myth: The interest rate is the main factor that you should Look for While Applying for a Loan
Interest rates are just meant to tell you how much amount you would require to pay at the time of repayment. It doesn’t stand as the only important factor while applying for a loan. Yes, you should consider this factor while applying for a loan but remember that that’s not just an important factor to look for.
There are other facets to look at, such as the time of repayment, for what purposes you can use the loan amount, and the terms of the loan.
4th Myth: It takes very long to get validated
Yes, the process of getting a loan is a bit of a long process. Even if you get a single thing wrong, there are chances for you to get rejected. But that is true for all levels of the business applying for the loan. There is no such thing as a startup business or small business, so more time will be required to get your loan approved.
There is a process that you need to follow. After you submit your application, the details in your application are verified, and after the verification process is over, they decide whether or not to give you a loan. It does take time but not as much as it is assumed to be.
5th Myth: Approval is Determined by Illogical Algorithms
Earlier, there was only one method of securing the loan for the Business. Visit the lender from a bank or private lender and have a one-to-one talk with them. Your business idea, marketing of Business, your confidence, and plans in the Business were enough for lenders to decide whether to approve your application or not.
Nowadays, some algorithmic systems have replaced all these interactions, which look at specific points in your application, and basis of that, they determine yes or no. Though the algorithm systems are used to verify your application, the modern funding process is not as impersonal as it suggests.
In reality, lenders still read your applications, go through all the small details, and based on that; they determine whether or not to approve your loan application.
Thus as the live interaction with lenders is replaced by online applications. You need to give details and present yourself well in your application to get your loan approved.
So, as now you have learned about the myths and facts of acquiring loans for small businesses, you can apply for the loan without any doubt.