With the rise of alternative lenders, the lending requirements have changed notably from where they were a couple of years ago. At present, it is not only easier for small business owners to qualify for a business loan, but it’s less complicated for them to apply. So despite the fact that you might think you already know all there’s to know about small business loans, you might be amazed.
In case your business might possibly need funding—here are four small business loan myths you need to be weary of.
- You Can’t Get A Loan If You Are Declined By A Bank
There was a time when your traditional banks were the only financing option available to businesses. And after the 2008 financial crisis, large banks tightened up their lending requirements, making it nearly impossible for small business owners to get the funding they need. Fortunately, that financial gap was quickly filled with alternative lenders, who currently offer small business owners more funding options than ever before.
- You Need To Have A Really Perfect Credit Score
This is still a half truth – in case you’re applying for a small business loan from a traditional bank, your personal credit score will be examined closely at some point of their underwriting process. However, since the traditional source is not your only funding option, an average or less than perfect credit rating will not completely spoil your possibilities of getting the funding you need for your business.
Even though almost each lender still examines your credit before approving or denying your business loan application, they have lenient standards. Additionally, some lenders even desire real-time data for your credit rating. The credit score still remains the most essential part of the loan application process. If your credit score is low, you have to take the steps necessary to improve it immediately.
For the most part online lenders will require you to have a credit score of 550 or above. This consists of short-term lenders and others presenting more expensive loan products. In case you’d like to look for long-term and low-cost debt online, you’ll have a score of as low as 620. In case you’re at a 700+, you’ll have fair chances with financing products such as SBA loan or the bank, which are the most reasonably priced products in the market.
- You Will Not Be Able to Get A Small Loan
The underwriting rates are the identical to the lender, no matter what the loan amount is. As the smaller loans imply much less of a return, banking institutions don’t consider the cost to be worth it and, generally, aren’t inquisitive about smaller loan amounts.
However thanks to the SBA, getting a loan is no longer a problem for small businesses that have low capital requirements and don’t require lots of cash. With Microloan program, the SBA offers loans for as little as $500 to $50,000. The interest rate on these loans vary from 8-13%. Plus there are many online lenders in the market that are willing to make loans with smaller amounts. If you need a small amount of working capital to pursue a business opportunity, you’ve more options than before.
- It Takes Long Time To Get Small Business Loan
In case you’re looking for a business loan through your nearby bank then, you will have large amounts of paperwork to fill out, and you could wait for months before you get funding. However, getting the funding does not have to be a long-drawn-out process. In case you need quick cash, you can get the help of an online alternative lender, fill out the loan application form provided on their websites within minutes, and get funding in just two days. The speed and the rate of the loan depend on the type of loan. Quick cash is expensive and so for a shorter-term financing product, you can move quicker than with longer-term financing product.
Even though some of these myths regarding small business loans were once true, however the alternative lending has change the whole small business lending game. At present it’s a whole lot easier for small business owners to get the quick funding they need for their business.