It’s extremely common for businesses, especially small businesses, to need to take out a loan at some point. The reasons for borrowing vary, but common credit uses include short-term cash flow management, acquiring new business property, funding new assets or equipment, and developing the next phase of business growth.
If you’re unsure about business loans in general, or you’re taking one out soon but feel unclear about whether you should believe the tales you’ve heard, read on as we confront some of the most commonly circulated business loan myths.
5 Common Business Loan Myths
Like with personal loans, taking out business credit can seem somewhat intimidating, especially if you’ve not done it before. You’ve probably heard a lot of rumours about business loans which have only compounded your reservations, but a lot of these rumours are false.
1. Your business must have an excellent credit score
As a small business owner, there’s a high chance you’ve not had time to build up a comprehensive or decent credit history yet. This is perfectly normal for new businesses, yet many owners believe that unless they have a perfect credit rating, they can’t apply for a business loan. This is simply untrue.
Businesses with little credit history or a bad credit score can still acquire credit, though the interest rate is typically higher. Naturally, the better your credit score is, the more lenders will want to give you and a better rate, but don’t be put off if your credit file leaves something to be desired.
At Aurora Capital, we can match you with lenders who work specifically with businesses that have a bad credit history or that are in the process of building up a credit rating. You’ll need to factor in the higher interest rates used as a form of risk management by lenders who lend to companies without a good credit rating, but none of this means you’ll be unable to obtain credit at all.
2. Only big businesses can borrow large amounts
Getting a business off the ground is no mean feat and requires consistent funding and lots of hard work. Depending on your business type and the assets you need to purchase, costs could be high. A myth that is often circulated is that big businesses are the only ones that can acquire larger loans, but this isn’t true.
If you want to borrow a larger amount, it’s entirely possible that lenders will consider giving it to you, but you will need to prepare a solid business plan with accurate and realistic financial projections. Lenders will use this to determine whether you’re financially sound and can pay back what you owe through monthly payments.
3. Taking out a small business loan means your business isn’t viable
In the same way some people view taking out personal loans as a sign of financial incompetency, many business owners are of the opinion that taking out a business loan means that the business isn’t doing well. This is simply untrue. Many small businesses require additional capital from time to time to help get them to the next level by buying new equipment or big-ticket items that will help their business grow. There’s no shame in taking a loan, even if it’s for cash flow issues when you have a lack of available working capital.
Some businesses operate differently to others and have seasonal periods or payment terms that mean money isn’t always consistently flowing. This isn’t a sign of a failing business – provided you’re able to pay back what you owe and still make a profit.
Rather than seeing loans as a hindrance, view them as a tool to help your business grow and develop into something bigger and better in the future.
4. Applying for small business loans is time consuming
If you need money in a pinch, you might think applying for a loan will take up a lot of your time. This common misconception was likely circulated because of the level of detail loan applications go into (business plans, financial projections, credit history) – but, provided you have this information to hand, the application process isn’t as long and arduous as you might think. In fact, at Aurora Capital, many of our lenders will review your application, approve it, and send money to your account within one working week!
If you’re a startup business in need of a quick cash injection, many lenders will allow you to get a business loan within a few days, so you can complete any financial transactions you need to without having to wait weeks for a decision and spending hours on the application.
5. Banks are the sole providers of business loans
Historically, the way businesses have taken out loans has been through a bank, and for some reason, many people assume traditional banks are still the only way to get credit. Over recent years, more alternative funding methods have arisen, meaning businesses now have more options than ever on how and who they acquire the cash they need. At Aurora Capital, we provide a range of alternative lending options, including bridging loans and unsecured business loans from a host of lenders.
Alternative funding can sometimes be the best option and offer the most competitive rates for small business owners, so before going straight to a bank, make sure you check out all your options with alternative lenders.
Getting a Business Loan at Aurora Capital
Are you a small business owner looking to get a business loan to fund the next stage of your business growth? Maybe you need some funds to tide over your cash flow on a temporary basis. Whatever your needs are, we can help match you with your ideal lender, ensuring you get the most competitive rates and the best deal for your business.If you’re unsure about any of our lending options or have questions about the business loans process, please contact us and we’ll be happy to help.
