Additionally, you can avail tax benefits out of taking a business loan as you can write off the interest payment as a business expense. However, there are a lot of myths around business loans like, for instance, a lot of people advice against taking debt and think it is harmful to the business among many others. Here are 5 small-business loans myths which are quite popular -
1. "I won't get a loan for a small amount"
It is not necessary for your monetary requirement to be a huge one just because it is a business loan. You can apply for the amount you need without having to worry if it will get processed or not.
2. "I don't have a great credit score so I won't get a business loan"
While it's true that you need a good credit score for your loan to get approved, it does not mean that if you don't have one your loan will get instantly rejected and you won't qualify at all. Two factors are looked into by the lenders when it comes to a business loan - the credit score of the entrepreneur and the credit score of the business as well.
Additionally, there are other parameters which are considered by the lenders like the financial situation of a business, including cash flow, the experience of the managerial team and the business plan. You may have limited options if your score isn't great but you'll have options nonetheless.
3. "Getting a business loan is very difficult"
It is a very common misconception that getting a business loan can be a difficult task. This is not quite true. If you have a good credit score and all the required documents, you instantly qualify for a business loan and the process is also fairly simple.
4. "Taking debt is not a good option"
Many people are of the opinion that taking a loan might hamper the growth of your business and put it at unnecessary risk. It is true that there may be risk involved but it all depends on how you plan to use the funds and the controls you put in place to help keep risk at a reasonable level. Sometimes, taking a business loan can help bridge the financial gap between your business and growth and help you scale it.
5. "It's risky to apply for a business loan online"
With digitization taking over our lives, the entire process of applying for a loan has become hassle-free. However, there are a few reservations about applying online as people are not sure about how safe and secure the medium is. If you apply for a business loan online, you have access to a wider base of lenders and can also secure better deals.
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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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