Business loans are the most viable option for the expansion of a business when there is a scarcity of capital. There are many banks that provide business loans at low interest rates. Unlike investors, banks don’t want a chunk of your profit. You will only have to pay the monthly EMI, and you are good to go. Many business owners are apprehensive about applying for a business loan due to misleading advice and misinformation.
Dissecting the myths around business loans is essential, and being informed will help you adjust and manage your finances better. Let’s take a look at some of the deceiving myths surrounding business loans:
You can’t apply for a loan if the amount is not sizeable
This is a delusional belief with no basis in reality. Business loans don’t necessarily imply astronomical amounts of money. Our government has devised and implemented many schemes specifically targeted to benefit small businesses. Once you are eligible, you can easily apply for a business loan.
Personal loans are better than business loans
While it is true that personal loans are approved faster, the amount received is generally lesser as compared to business loans. It is worth considering that business loans will not affect your personal credit history and will be in the name of your company. Also, applying for a business loan for new business will help you maintain a clear distinction between your personal and company finances.
Getting a business loan is an arduous task
This is a common misconception held by many small business owners. If you have a good credit score and fulfil the eligibility criteria, getting a business loan will be simple and easy. However, it is mandatory that you conduct an exhaustive research and choose your bank wisely. Another important factor that you’ll have to consider is the business loan interest rate.
Property collateral is absolutely necessary for obtaining a business loan
This is simply untrue as there are many other options available. Our Ministry of Finance has made it possible for small businesses to obtain loans without keeping their property as collateral. However, there are certain terms and conditions that you’ll need to fulfil before applying for your business loan.
You can use personal savings as a replacement for business loans
Investing your personal money can be considered as a major risk. If you incur losses in the first few months, you can use your personal savings as a contingency fund. However, applying for a business loan will help you maintain emergency funds for a rainy day.
If you’ve decided that you need a loan for your business, here’s a quick look at the different types of loans available in India:
- Business loans for start-ups: These loans can be used for various purposes, including research and development, buying new equipment, paying your staff etc.
- Business loans for bad credit: There are many banks who would be willing to offer you credit despite your poor score. You can use your property as collateral in this case for obtaining a business loan.
- Business loans for women entrepreneurs: This is to facilitate the growing number of female business owners and achieving gender equality.
Depending on your needs, you can choose the required loan for your business.