When you type ‘What is a Business Loan?’ on Google, you will find a host of results that contain both facts and made-up stuff. We all know that myths are sometimes taken as truth and acted upon without much rationale. The same holds true for Business Loans, as they are a diverse financial instrument. A lot of myths have been bubbling into the market, inevitably creating a scenario where most people accept them as truth. Without busting these myths about Business Loans, it will be difficult for individuals to utilize the benefits and grow their businesses to the next level.
Here are the top 7 common myths circulating in the business world regarding unsecured business loans that you should know. Read on.
7 Common Myth Busted about Business Loans
Only Banks offer Business Loans
This myth is quite popular among the masses. It is believed that only banks are allowed to offer Business Loans to small and medium enterprises and large companies. This is untrue. The growth of Fintech companies has led to the birth of a wide range of Business Loan products. Now, you can visit the official websites of these new-age Fintech companies and use their Business Loan interest rate calculator to choose Business Loan products according to your specific needs.In fact, Business Loans offered by NBFCs are collateral-free, quicker to apply and get funds and need lesser documentation than any of the banks present in the country. So, now you know where to apply for funds when you want to skip tedious processes and long wait times Unsecured Business Loan.
A bad credit score means no Business Loan
A bad or low credit score does not imply that you are not eligible for availing of Business Loans forever. It is just a tad bit more challenging to get a Business Loan approved from a private or public sector bank. However, in such situations, NBFCs and other Fintech companies come to your rescue. NBFCs like Clix Capital offer Business Loans easily to organizations with a CMR score of up to 6 and co-applicant CIBIL score of 700 & above.However, this does not mean that the NBFCs wouldn’t offer you a loan with a lower credit score but it implies higher interest rates. When you qualify for a loan with a good Experian credit score you get the best terms and conditions but a lower credit score will almost always result in a higher interest rate being levied on the same amount. We still recommend you maintain a good credit score to be on the safer side so that future financing is not hampered.
Only businesses that are incurring losses need Business Loans
Some businesses might try to mitigate the losses incurred through a Business Loan but this is not true for all businesses. Additional funds do provide a helping hand to improve cash flow and make some recovery but it’s not the only reason why enterprises look for loans. The majority of entrepreneurs, companies, and enterprises avail of Business Loan for reasons such as expansion, purchasing real estate, equipment, machinery, procuring materials, boosting inventory, and recruiting new staff.So, when looking to innovate and expand beyond your business horizons, you can take Business Loans and work on your financial aspirations.
Small Businesses are not eligible for larger loans
This is one of the most common myths going around entrepreneurship circles. This is not true though. Small businesses include both MSMEs (Micro-small and medium enterprises) and SMEs (small and medium enterprises). The owners of these types of firms can avail of loans in higher amounts without any hassles. There are Fintech, NBFCs and banks that offer Business Loans up to Rs. 5-50 lakhs based on the applicant’s financial condition. Unsecured Business Loans need no collateral to offer as security and can be accessed easily.High-Interest rates are levied for Business Loans on online portals
Another major myth says that interest rates mentioned on online portals are higher when compared to what applicants are offered during a visit to a bank. This is not true.There are numerous market aggregators in the financial market that get contracted interest rates from NBFCs and banks, which are then offered at discounted rates to their customers. Market facilitators like online portals reduce clients’ effort, time, and money by making them easily accessible and quicker.
Business Loans are time taking and include tedious paperwork
You might have frequently heard that a Personal Loan or credit card cash withdrawal are the only options when you want quick funds for anything particular. Usually, people believe that getting funds faster is not possible with Business Loans. This myth is busted by the fact that many financial institutions offer small Business Loans that can meet your urgent cash needs at affordable interest rates. You can get small Business Loans ranging from 5 lakhs to 50 lakhs based on business needs and lender’s discretion with a flexible repayment tenure.Moreover, the tedious paperwork has been replaced with simple documentation that is processed quickly by the NBFC to approve your loans. So, say goodbye to traditional Business Loans that took forever to get approved and go for unsecured Business loans for quicker turnarounds and less paperwork.
Borrowers must submit collateral to avail of Business Loans
A popular myth when you refer to internet search results for a Business Loan is that collateral is compulsory to avail of any type of Business Loan. This is untrue.When it is a secured loan, you need collateral to avail of loans but for unsecured Business Loans, this is not true. No collateral or security is needed by Fintech lenders like Clix Capital to be mortgaged to avail of Business Loans.
You can use collateral-free Business Loans for a variety of purposes including working capital, inventory procurement or talent acquisition.
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