Business Loan Myths To Disregard
Posted on: 8 December 2014
Owning a small business can be one of the most challenging careers to undertake. In addition to dealing with personnel, taxes, marketing and strategy, you must also manage the finances of your company. Yet, there may be times when your business's needs are growing faster than its cash flow. Fortunately, it is possible to obtain a business loan to give your business access to the resources it needs to capitalize on new opportunity, but if you believe these common myths, you may not utilize this resource to your advantage.
Myth: Business Loans Are Only For Large Companies
Some individuals are under the belief that only large enterprises can qualify for business loans. However, this is not always the case, and it is possible for even small business to obtain financing. Sadly, some large banking institutions may consider small businesses a higher risk, and this can increase the interest rate demanded by the bank.
Luckily, there are many programs available to help small businesses obtain financing at a rate they can afford. However, these loan programs are often administered on the local level, and this can cause there to be a large amount of variation in the rules and requirements for these programs. To learn more about the loan programs in your area, contact the local chamber of commerce and small business administration for more information.
Myth: Your Personal Credit Does Not Influence Getting A Business Loan
Many people think that their personal credit will not have an impact on their business's credit if they're incorporated. Unfortunately, this is not always the case, and there may be times when banking institutions will judge the creditworthiness of your business on your personal credit history.
In fact, unless your business is large and dealing with millions of dollars a year in revenue, the bank will probably want to closely analyze your personal credit before issuing a loan to your business. Due to this, you should always ensure that your personal credit is in excellent shape before you go to the bank to apply for a loan.
Growing a business often requires an injection of capital. Loans are among the most commonly used sources of capital, but applying for a business loan is a very misunderstood process. After you learn the truth behind these two prevalent myths about small business financing, you will be in a better position to determine if this is a viable option for your enterprise.
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