Small businesses unlike their larger counterparts often face challenges when securing credit because of their rather unfamiliar organization structures. Large businesses particularly established companies have a structural familiarity most financial lenders can associate with and this makes it easier for them to secure different types of funding. Small businesses on the other hand have been often sidelined because the market doesn’t have as much facilities tailored for them as there are for large corporates. This and other scenarios have given rise to lots of misconceptions people have on small business financing. The following are some of them:
Getting Small Business Financing is Extremely Difficult
Inasmuch as securing small business loans is somewhat complicated, it is not insurmountable. According to the lending experts, getting small business financing becomes much easier if you anticipate and prepare for the challenges you are likely to face during loan application and approval. Small business loans for women are the most challenging and frustrating, but even that can be overcome with a thorough due diligence on the part of the applicant. Ensure you have ready all the documents lenders may ask such as financial statements, business plans, as well as collateral documents.
To Get Approved for Small Business Loans, You Need A Perfect Credit Score
Some people have been made to believe that bad personal credit automatically bars them from accessing financing. Certainly, a low credit status has its own disadvantages but in today’s lending environment, most financial institutions are open to applicants who have subpar credit ratings. The presence of alternative funding options which base their lending decisions on business realities and not necessarily on the financial history of the applicants has made access to loans much easier. The lenders look at your business performance, the time you have been in business, the industry you are operating in, as well as your cash flow before giving you loans.
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The Bank is Only Safest Option for Financing Small Businesses
While it is true that banks have been the traditional lending partners for most small businesses, the tide is changing fast. With these banks still holding onto their restrictive lending policies, alternative options particularly for advancing business loans for women such as online lending systems have emerged to offer borrowers alternative packages. Many of the small businesses do not require hefty amounts and as such banks may not be attractive because their focus is on significant loan amounts that run over longer durations.
Asking Too Much Money in Small Business Loans Leads to Lesser Approvals
Small business owners have been confined to asking for small amounts because they believe getting approvals for large amounts is next to impossibility. However, the reality is, the business landscape is tilting in favor of small businesses and many of them get what they apply for; no more no less. As the business owner, you have to consider the much you need to grow your business and the much you can afford to pay back on a monthly basis as you apply for your loan.
In addition to the above misconceptions, small businesses have idolized business plans and treated them as the magic wand to securing business financing. While the business plan is considered to be the Holy Grail of all documents, most modern lending platforms particularly the online based do not give it as much weight because other areas of the business are assessed as well as to determine viability of your loan application.