When it comes to applying for short term business finance, it is wise to learn about their requirement rather than bothering about it later. Many borrowers cannot meet business loan requirements when they require some urgent cash. It happens because they have not prepared themselves adequately.
So, when you plan to take out any loan, you should gather all the documents and other necessary information to qualify for equipment financing or any other business loan.
Apart from this, there are numerous myths about business loans these days. As a result, many would-be borrowers often get confused about the requirement and eligibility of short term loans. Some borrowers go backwards due to these misconceptions even after planning to take out a loan. So, as a borrower, you might also get confused and backed off from approaching 2nd mortgage lenders or other lending institutions. However, you should know the truths associated with these myths. That is why, to help all the would-be borrowers, we have debunked some of the most common misconceptions about short term loans. It will serve as the best solution for many business owners before applying for a loan.
Myth-1 Bank is the only place for borrowing a loan
One of the prevalent misconceptions about short term loans is traditional banks are the only place where you can get a loan. Those days are gone when you can only take out a loan from banks. Nowadays, with the growth of many 2nd mortgage lenders and other lending institutions, you can easily apply for any loan with no difficulty. Applying for capital to lenders is beneficial as well. For example, banks have particular criteria, and if you cannot meet those, your loan application will get rejected. Besides, the approval process of the bank is also complicated and time-consuming. As a result, if you need urgent cash, you will never get it on time. But the private lenders have flexible loan eligibility criteria, and their process is also fast and hassle-free. Hence, traditional banks are not only a one-stop solution for loans in today’s world.
Myth-2 You have to be in a specific business
Traditional banks prefer higher-earning businesses and give them loans. It is problematic for small businesses as they cannot get a loan. But it is a misconception as the 2nd mortgage lenders and other financial institutions will never look into your business type for loan approval. You do not have to be in a specific and productive business to get a loan.
Myth-3 You cannot demand a large amount of money
Another common myth about short term business finance is you cannot apply for massive funding. Irrespective of the loan you want to borrow, you can seek large amounts of capital. But for this, you should have security for the loan together with adequate income or cash flow and all the relevant papers. You should also have a detailed and productive business plan. All of these will help the lenders to determine your creditworthiness. Hence, overlook this myth and ask for your required amount when visiting a lender.
Myth-4 The loan application process is lengthy
Though it is true in some cases, depending on the loan type and lender or financial organization you select, but mostly it is a myth. Apart from traditional banks, private lenders now use an automated process for any loan application process. They also have a more streamlined loan application process that is simple, time-saving, and transparent. Thus, the loan application process is not lengthy these days.
Myth-5 You have to provide countless documents
Irrespective of whether you are applying for equipment financing or any other funding alternative, most lenders demand only the necessary documents for the loan application. You can submit the papers online as well. When applying for a loan, all you need is to submit the below documents.
- Your personal and business account details
- Banking or financial statements
- Credit report
- Business plan
So, you can see that it is also a prominent misconception that surrounds short term loans.
Myth-6 You need an excellent credit score
Another prevalent misconception regarding the requirement for applying for a short term loan is the borrower should include a high credit rating. Yes, a credit score that records your invoice and loan repayment history matters a lot when submitting a loan application. But it does not mean that you cannot secure your business fund if you do not have an excellent credit score. If you have an inadequate or low credit rating, the lenders look at other factors in your application. After that, they determine whether you are creditworthy or repay the entire loan amount with interest or not. So, if your business has future growth potential and an adequate cash flow, you can easily qualify for any loan, even with a poor credit score.
Myth-7 You have to submit collateral to borrow money
It is another misconception as without submitting any collateral, you can also apply for equipment financing or any other loan type. If the lender you choose asks for collateral and you do not have any to provide, then the lender will consider other factors to determine your creditworthiness.
Myth-8 Only failing businesses can apply for loans
It is a myth as a flourishing business can also apply for a business loan. If your business is growing, cash flow is healthy, repay the loan, and you can easily submit the loan application and get approval. Thriving businesses will get better loan terms like more affordable interest rates and flexible repayment terms as it is less risky for the lending institutions to lend them money.
Final Words
To conclude, as a business owner, when you are planning to take out short term business finance, you should read these myths and the truths associated with them. It is beneficial for understanding the requirements of a loan application, and you can also get knowledge about different things through these. Hence, remove these misconceptions from your mind and apply for a loan to grow your business to the next level.