Now-a-days more and more people are opting for business loans for their various business related needs. The business loans are not confined for large conglomerates any more. Banks and NBFCs offer business loans for start ups, micro and medium level businesses. These loans are smaller in amount as per the needs of the small level business thus these are known as small business loans. Though the banks and NBFCs are happy to give small credit amounts on loan for business purposes, there are many myths going around about the same. So let us help you to separate fiction from facts.
MYTH 1: Loan approval is done at snail’s pace
Loan procedures are lengthy. You need proper documentation and eligibility to get quick approval on your loan proposal. Many think that business loan approval is like preparing and going for an Everest trek, which is NOT TRUE. If you have clean documents, right eligibility and a considerable business plan, you can easily avail a loan within 7 working days. And with the new online application procedure offered by Ruloans, you can get the desired amount of credit in no time!
MYTH 2: You can’t get loan for new business
To establish a new business, one has to start form the scratch. Starting new venture requires basic capital amount which can’t be covered by savings. Even if one uses savings as a capital amount, that is not a financially sound decision. Thus the new entrepreneurs should opt for a small business loan. But many think that banks give business loan to establish businesses with a strong and existing credit score in their name. A new business obviously doesn’t have a credit score so they can’t avail a small business loan, which is NOT TRUE. Banks give small business loans to entrepreneurs based on their personal credit score and their business plan. So people who are afraid of starting a new venture thinking they won’t get any loan, don’t need to be scared anymore!
MYTH 3: You need a perfect credit score or else you won’t get a small business loan
Having a strong credit score is a witness to your financial stability. It is considered in the beginning of the loan approval process. Having a perfect credit score surely helps you get the required loan amount but it is NOT TRUE that it’s the only factor or it needs to be strong. Those who are starting a new business may not have a perfect credit score or even a credit score sometimes doesn’t define your worth and eligibility to pay off the loan amount in future. So yes, it is an important factor to get a small business loan, but not the only one. Even if you have a normal strong credit score, a worthy small business plan and a set of clean required documents, any financial institute can grant you the loan.
MYTH 4: Small Business Plan: necessary or not?
The myth about requiring a business plan works both ways. Some say they do where as some say they don’t. Some banks require a full-fledge business plan where as some give loan on business’s credit score. It totally depends from banks to bank. But every applicant should be prepared with at least a notion of why they require a business loan. Be it for expansion or to buy new equipments, it’s always better to be ready with answers to why you need a small business loan?
MYTH 5: You won’t get a small business loan for higher credit amount
A business can be small or bigger depending upon the business plan, locality and the idea itself. Thus the funds required for business loan can vary from mere lakhs to crores. Many think that banks and NBFCs give away small business loan for smaller credit amounts. If your requirement is bigger, you’ll get rejected, which is NOT TRUE! Micro, small, medium and large; all types of businesses can avail loans. According to the government rules and regulations, small amount loans are granted by financial institutions.