When we talk about business loans there are a lot of presumptions made by small, medium, and large-scale businesses that are more myths than mere presumptions. A business loan is like an unsecured fund provided by a bank or a Non-Banking Financial Company (NBFCs) to different scales of businesses to help them cope with their day-to-day expenses, cost of raw materials, marketing, and advertising expenses, etc. 

The rate of interest provided by the banks or the NBFCs purely depends upon the scale of business they operate on, its revenue, profitability, and so on. Nevertheless, many aspiring entrepreneurs have embedded certain myths regarding the issue of business loans. So, here we are to clear up those myths and help you kick start  

• The myth of perfect credit history 

Maintaining a good credit score is good but then maintaining it perfectly is a myth. Having a good credit history increases the chances of you getting a business loan, but you do not need to have a squeaky-clean credit history to get yourself noticed by the lender. 

Also, the credit score of the business depends on the type of loan you are applying for. Short-term business loans provide you with a good credit score when many lenders want a score above 550. 

• You need to be big to apply for big loans 

Many small business owners wrongly believe that applicants seeking business loans should only ask for a substantial amount of money and that small loans don’t apply to them. Certain non-banking financing organisations and microloan providers concentrate on the small business owners who want business loans, in contrast to the traditional banks’ preference for large-ticket business loans, which are worthy of their time and money. 

It’s not a matter of great concern if you are a small business and expect a bigger loan. One thing that is a matter of concern is making the lender believe that you are trustworthy and that you will be able to repay the debt or the loan.  

• Too much expectation can get you rejected 

The amount of the loan has got nothing to do with the fact of getting approval or not. It purely depends on the evaluation of your cash flow and the surety that you give to repay the loan back backed up with proof. 

• There is only ‘A’ kind of business loan available 

There are numerous varieties of business loans, each with unique advantages and goals. The most typical type of loan is a term loan, which has a longer repayment period. Loans for working capital assist both small and large organizations in filling gaps in their daily cash flows. Then there are overdraft facilities offered against securities or other types of collateral, such as fixed deposits, and equipment financing designed expressly for the acquisition of machinery and equipment. Business loans differ from one another in terms of the interest rate and other loan terms. 

• A business is needed to get a business loan 

This is not true. Anyone can apply for a business loan if they have the goal to start a business. Yes, of course, it becomes easier for the existing businesses to get approved for the loan application because of the longer financial track, but that doesn’t mean that you cannot start a business with the same.