Debunking the Small Business Loan Myths

Finding enough and the right kind of small business financing is vital to every growing company. Small business loans can be a great windfall for any firm, but over the years several myths have been built up around them. While there can be some struggles and hard work associated with securing a loan, here are three myths that should be dispelled.

Myth #1 – Don’t Ask for Too Much Money

When asking a lender for funds, the amount is not so important as the reasons why you are asking for that sum. You should carefully calculate how much your company needs for its next growth phase, its next equipment or inventory purchase, it’s next round of hiring, etc. As long as you can back up your dollar amount with facts and figures and projections, requesting a large loan is just as likely to be approved as a small one.

Myth #2 – You Must Have Perfect Credit

Lending standards are still tighter today than during the years before the Great Recession, but they have loosened enough to allow those with dinged credit a shot at small business loans. It is important to do all you can to improve your credit score where possible, but in today’s world, less-than-perfect credit is not always a deal-breaker. And if you cannot qualify for a small business loan with a traditional lender, there are plenty of alternative lenders that work can help you secure the business funding you need.

Myth #3 – Your Business Plan is Everything

A standard business plan is starting to be considered outmoded among some lenders. While you will still need that collection of profit statements, executive summaries, market analysis, cash flow and balance statements with traditional bank lenders, many other lenders may not be as concerned with the business plan documents. And while it is always smart to have a business plan – to set goals, predict and plan for growth and keep tabs on all the important figures, many online lenders do not require business plans. In some cases, a business plan is not even necessary for getting an online Small Business Administration (SBA) loan. Check with your potential lender before putting hours of work into preparing your business plan.

In applying for any type of small business funding, be sure to check out all the requirements yourself rather than relying on rumors. It will save you a lot of headaches and possibly even earn your business some cash.


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