Every business organization whether new or an existing one needs adequate finance to stay afloat. Thus to overcome lack of finance in business, an entrepreneur may have to consider the option of obtaining a business loan.
There are several ways of getting a Business loans, you can obtain business from your local money lender, financial institutions, credit unions, and banks to increase efficiency and profitability of your business.
About Obtaining A Business Loan
Some business owners will give you unnecessary reasons why they can’t take loan even in the face of business collapse or stagnation due to lack of information concerning the process of obtaining a business loan.
I would say categorically that miss information concerning the process of obtaining a business loan has indeed created some common misconception in the business world which has held many businesses down.
So, if you are contemplating of taking a loan to grow or expand your business, below are some five common misconceptions about business loan to watch out for as enumerated by Olumide Olatunji, a Digital Accounts Associate at Lendigo Nigeria.
List of the 5 Common Misconceptions
All Business Loan Applications Require High-Value Collaterals
Loans Are for Only Failing Business
Only Banks Give Business Loans
Applying for Business Loans is Time Consuming
The Higher, the Amount Demanded, The More Difficult The Approval Rate
First Misconception:
#All Business Loan Applications Require High-Value Collaterals
For small business owners, obtaining collateral could be the scariest thing about taking a business loan. After all, you want to take the loan because you need capital, so locking up a significant part of the capital seems to defeat the purpose.
It’s true that many business loans require collateral that is equivalent to your loan, and if you are not able to refund it, your money goes for it.
But not all loans require collaterals. There are a lot of business loans that have no collateral as a requirement.
These include unsecured business loans as well as unsecured lines of credit and business credit cards. You will personally be responsible for paying back your loan. But all you have to do is get personal guarantors. In the event that you are unable to pay back the loan, the people who signed as guarantors on your behalf will have to pay back out of their own pockets. This is a creditable substitution for you, as you can pay back the individual at any time without having to shut down your business.
Second Misconception:
#Loans Are for Only Failing Business
Indeed, a failing business needs a loan than any other business, especially when bootstrapping or self-funding is no longer sufficient to keep the organization going, and all other financial sources have failed. Sometimes, a business loan becomes imperative to save a business from dying.
However, loans are not meant for struggling businesses alone. There are many reasons why a very successful business may need a business loan. For example, such a business may need to take their business to the next level or expand its business terrain. They may also want to get more sophisticated and modern equipment or introduce a new product.
Preferably, it is better to acquire a loan to expand and improve a stable business than to invest a loan in a dying business. There might be debts to pay and taxes to settle, which may take a larger portion of the loan in a dying business. Whereas, in a stable business, the loan is wholly directed towards getting profit from the business.
Third Misconception :
#Only Banks Give Business Loans
It is worth it to know that there are a lot of other institutions that give loans to businesses. In essence, this means that you now have a range of choices to pick from, depending on the nature of the financial institution and the purpose of the loan. Some of these financial institutions grant easy access to loans, while they do not require collateral. For example, online lenders like Lendigo give loans to small businesses other than banks.
Fourth Misconception:
#Applying for Business Loans is Time Consuming
Since the advent of technology, things have become considerably easier day by day. The long queue in banking halls and customer care units have almost vanished into thin air. Pages of paper documents usually filled all day long at financial institutions can now be filled as a digital document at any time and anywhere with your smartphone or laptop.
Banks and Lender have taken up mobile and web tools to make acquiring loans easier than before. These technologies allow remote access to almost everything pertaining to the loan application. This includes monitoring the progress and making necessary repayments using electronic money transfer platforms. Therefore, all the factors that made applying for a business loan tedious have been substituted and made faster by technology. Many lenders are specialized in funding business owners quickly when they need it without allowing weeks or months of waiting through a specialized system.
Fifth Misconception:
#The Higher, the Amount Demanded, The More Difficult The Approval Rate
When applying for loans, there are major factors you should consider. You may have come across some of them while reading this article. But the belief that the higher you demand, the more difficult your approval is a great misconception. Business owners should demand the exact amount of money they need to grow their business. This is because it has no adverse effect on whether the loan will be approved or not.
Interestingly, higher loans favor the financial institution in the long run. So, don’t hesitate to demand the exact amount you need, for it is not a factor to consider. You should rather consider how much you can afford to pay back at the time required, how much do you need to grow your business
Conclusion
I believe some of your misconceptions about getting a business loan has been cleared. Now that you know the facts, if you need a business loan, get it. You can get a loan from us if you prefer by checking if your business is eligible.
