5 Misconceptions about Business Loan that needs to be debunked

Posted by Reliance Commercial Finance on December 14th, 2016

Starting a business of your own is not a far-fetched idea anymore. This is especially because of the recently launched initiative like “start-up India” by the Indian government to promote entrepreneurship. But many a times, we are not able to turn our dreams of establishing a company into reality due to lack of financial support. It is important not to let financial difficulties get in the way of realizing your dream, especially when it is easy to get business loans in India.

There are a few myths associated with business loans. Get aware of them before you apply for a loan. The top 5 myths about business lending are listed below.

1. Loans with lesser amount don’t get approved

Business loans don’t always mean that the loan amount has to be in crores. There are businesses that require hefty sum for loans, but this does not mean that loans with smaller amounts are never approved. Nowadays, government lay equal importance to small and medium enterprises and therefore business loans with lesser amounts are eligible for the grant.

2. New businesses cannot apply for loans

The startup culture is gaining popularity in India. While a lot of them start with investors venturing in, many have to face a lot of difficulties when it comes to capital investment. But this doesn’t keep new businesses away from getting loans. Although, it is easier for well-established businesses to seek loans, banks and other financial institutions are coming up with start-up loan schemes to lend financial support to new and promising businesses.    

3. A good credit score is what matters the most for loan grant

Undoubtedly, a good credit score is a strong influencer while seeking a small business loan in India. But nowadays, financial institutions give weightage to other factors as well. These include your business history in terms of profits, stability and financial status. For a new business, growth plan and long-term vision will be closely reviewed by the financial institution. But make sure to keep your credit score high with timely repayments of credit card bills and other debts.

4. If a bank declines your loan application, you can never get a loan

In case your loan application is rejected by the bank, you can approach non-banking financial companies. They consider the strength of your business plan and your capability of loan repayment. So do your research and find a good lender.

5. Loan approval takes way long time

If your documents (income statement, business plan, etc.) are in place, loan approval does not take a lot of time. Make sure you present accurate information in your loan application. Once the bank verifies your documents and is convinced about your ability to repay the loan, your application will be approved.

With government initiatives and loan schemes for start-ups, starting a business has become much easier. At the same time, don’t limit your options only to banks. In fact, look for financial institutions that offer business loans at a minimal interest rate.