5 Myths about small business loans debunked

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5 Myths about small business loans
debunked Running a small business is no easy task
especially if youre looking at expanding. This
is why entrepreneurs often tend to go for a
small business loan in Delhi and other industrial
hubs in the country in order to give a boost to
their business. Now that fintech companies and
NBFCs have propped up in the industry, taking a
loan has become somewhat of an easier process.
Still many business owners arent very aware of
the pitfalls and advantages of taking loans and
believe in many myths and misconceptions. Lets
take a look at some of the most common myths
about small business loans so that you can have
a better understanding of the process. Small
loans can only be taken from banks There are a
lot of small businesses that depend on
traditional banks for availing loans, but its a
relatively difficult process. Banks are very
strict in terms of analysing credit history and
they take a lot of time in disbursing the loans
not to mention you can only avail loan against
property or other assets. It becomes a real
problem in cases where you need a loan urgently.
The better option in such cases is to go for
NBFCs that can disburse the loan within two to
three working days and the entire process is
managed online for ease of access. You should
always borrow a bit more than you need This might
sound like some sort of safety mechanism to
ensure you dont fall short of money, but in
reality, its just poor planning. Every extra
penny that you borrow, you will need to pay back
with added interest, regardless of whether you
used it or not. Therefore, it is very important
that you analyse your financial needs carefully
before availing business loan in Delhi or
anywhere else. You need an excellent credit
score to get a small business loan This myth is
partially true. If youre applying for a loan
from a bank, youd need to have a good credit
score. But even if you dont have a good credit
score, there are other ways. You can approach an
NBFC for the loan. What the NBFCs do is that they
evaluate your credit worthiness by analysing data
like your unpaid invoices and monthly debit card
as well as credit card sales. They include a
number of other factors as well, like the
duration of your existence in the industry, the
nature of industry itself, your annual profits
and turnover and whether the net cash flow of
your company is positive or negative. The best
parameter for comparison between different loans
is the interest rate Given that interest rate can
affect the amount of money you will be repaying,
it isnt everything. Some of the most important
factors include the tenure of repayment and the
terms on which the loan is being disbursed.
These things are often overlooked in pursuit of
the smallest interest rate ad people end up
regretting later. Therefore, you must pay
attention to the fine print and read the terms
and conditions very carefully before availing a
loan from an institution. Applying for business
loans online is not safe Even though the NBFCs
have existed for a while now, there is still a
lot of stigma regarding applying the loans
online. People, especially in India, for some
reason, do not trust the online medium even
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though it has been demonstrated that it is much
more secure and efficient than the offline
method. Many NBFCs even have systems set up for
disbursing loans without any human intervention
at all. These companies are the future of the
lending industry and it is a myth that needs to
be disposed of as soon as possible.