No matter how big or little, every business owner occasionally needs extra cash to pay short- or long-term expenses that the company’s revenue or cash flows cannot support. In such circumstances, business owners can either invest their own money or seek outside funding such as a business startup loan in Gujarat.
A business loan is a type of credit that can be used to bridge the gap in short-term expenses, such as those paying salaries, buying machinery, paying off utility bills, or paying rent, as well as for long-term expansion, such as establishing a new factory or office.
However, a lot of business owners frequently have a number of questions regarding business loan in Jamnagar; especially those who own micro, small, or medium-sized businesses or who have never taken a business loan.
Here are some prevalent myths and the counter truths about them –
Myth 1: You get business loans only from banks
One of the biggest misconceptions about business loans is this. Many business owners, particularly rookie ones, believe that business loans are solely available from banks. Many non-banking financing businesses (NBFCs) and modern fintech startups, however, offer this type of credit. The cheapest interest rates may be provided by banks, particularly state-run banks, but NBFCs and other alternative lenders provide quicker approvals, better customer service, flexible repayment options, and a number of other advantages.
Myth 2: Loan Approval is a complex process
Although many lenders have distinct procedures for approving company loans, fierce competition has prompted some lenders to streamline and accelerate their strategies. The days of lenders taking months to approve a company loan are long gone. A company loan application can now be finished online in a short amount of time. Within a few days, the lender can approve the loan and deposit the funds into the borrower’s bank account after verifying the documentation. Again, NBFCs are the most efficient in this situation, although other banks can require more time.
Myth 3: Businesses Should Arrange A Collateral Before Getting a Loan
This is another widely held misconception, particularly among small business owners, that lenders want security in the form of an asset before issuing a loan. Because they either don’t have enough assets to pledge or don’t want to for fear of losing the assets, smaller enterprises are frequently discouraged from taking out loans as a result.
In truth, the majority of lenders offer both secured and unsecured company loans. Smaller unsecured business loans typically don’t demand any kind of security. Lines of credit, merchant cash advances, and other credit products without collateral are also provided by several lenders.
Myth 4: A Business Loan Is the Last Resort
Many individuals are wary of debt and believe that only businesses that are struggling financially or are doing poorly should take out loans. On the other hand, a business loan can assist an organisation in doing much more, from investing in marketing and technological upgrades to boosting operations and becoming more competitive with rivals.
Myth 5: Only Big Companies are Eligible for Business Loan
A company is not prohibited from requesting a business loan because of its size. Micro, small, and medium-sized businesses are aggressively lent to by several banks and NBFCs (MSMEs). Even enterprises that are just getting started and haven’t even begun to bring in income are given loans by several lenders.
Additionally, self-employed professionals are eligible to apply for business financing. For example, doctors can get a loan to open a clinic, and chartered accountants can get a loan to start or expand their accounting firm.
The ability of the firm to repay is more important to the lender than the size of the company. Therefore, a company can easily obtain a business loan if it is producing enough cash flow to pay down its debt on a regular basis. If the company can persuade the lender that it will use the loan to carry out a business expansion plan that will enable it to repay the debt, it may be able to obtain a loan even if its present cash flow is insufficient.
