Business Loans: 7 Myths and Reality

Posted by mymoneymantra on June 30th, 2018

Running a business is one of the most complicated tasks that involve handling multiple duties at the same time. It also requires you to put in extra efforts and long hours just to make sure that your business venture gets on the track of success. Initially, you have to use your personal funds to get your business going, but after the size of your business grows considerably, your personal finances might not suffice to keep up the pace of growth. In such a situation, the best option for you is to seek funding from an external source to keep your business going. There are multiple options that are available in the market, but the most suitable option with numerous advantages is a Business Loan.

What is a Business Loan?

Business Loan is a term given to different financing options that are extended by recognised financial institutions, banks and non-banking financial companies (NBFCs), to business owners for the different business-related purpose. Depending on the nature of requirement and your credit profile, these loans might be secured or unsecured. The rate of interest and repayment tenure depends on the terms and conditions of individual lenders. You can apply for a Business Loan online as well as offline, depending on your requirements.

Myths Related to Business Loans

Business Loans are one of the most beneficial financial products for business owners, but as is the case in the Indian market, there are numerous myths associated with them that deter a large number of business owners who are looking for the said facility. Understanding the importance of availing a Business Loan for the financial health of a business, here we are enlisting the most common myths that are doing rounds in the market and their answer as well:

1. You need a perfect credit score

Although it is true that a good credit score is vital in deciding the outcome of a Business Loan application, it does not mean that if you have a lower credit score, then your application will not be approved. There are various lenders in the market who offer Business Loans for lower credit score also, but as their risk factor is increased, they charge a higher rate of interest against the facility. You can also opt for secured Business Loans if your credit score is low.

2. You need security to pledge

Having collateral significantly increases your chance of getting a business financing, but it is not written anywhere that if you do not have security, your loan application will not be approved. There are various lenders offering unsecured Business Loans that do not require you to pledge any security. Similarly, Government of India has also introduced various schemes that help you get unsecured Business Loans.

3. Business Loans are for higher amounts only

This is a common misunderstanding amongst a lot of people that Business Loans are meant for higher amounts only, running into crores. But it is not the case. Business Loans are offered by various financial agencies from amounts starting as low as Rs. 50,000 and going up to crores of rupees. It all depends on the nature of your requirements and repayment capacity.

4. Using personal savings is a better idea

In India, most of the businesses are family owned, and it is common thinking that taking a loan is a bad omen and you can manage everything with your personal finances. But have you ever thought that once your personal savings are exhausted, you are exposed to various risks on personal as well as a professional level? If your requirement can be met through a Business Loan, which you need to repay in EMIs (Equated Monthly Instalments), then why wipe out all your hard-earned savings in one go.

5. The interest rate is the only import parameter

No doubt, interest rates are one of the most important factors when you sign up for a Business Loan, but there are various other factors that you must consider in order to determine the total cost of the loan. These include prepayment charges, foreclosure charges, processing fees, the reputation of the lenders and various other parameters. You must take a decision only after you have considered all these factors.

6. Personal Loan offers are better

No doubt, Personal Loans can be used for business purpose also, but there is no benefit in doing so. First of all, the rate of interest against Personal Loans is on the higher side. Secondly, you will not be getting any tax benefit on the interest component of the Personal Loans, and thirdly, Personal Loans are usually sanctioned for smaller amounts only.

7. It is an arduous task to get a Business Loan

Most people think that the process to apply for a Business Loanis a daunting task and takes a lot of time. But it is not so. Now, with the availability of online lending marketplaces like MyMoneyMantra you can apply for Business Loans online with the lender of your choice and get your application approved in a few working days as well. You need to have a good credit score, all documents in place and a clear business plan to make sure that your Business Loan applications are approved quickly.

Business Loans play an essential role in helping you manage your business finances effectively. They also make sure that you do not put unnecessary strain on your working capital and are able to handle all tasks conveniently.

To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 60+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.

Talk to our Loan Specialists toll-free at 1800 103 4004 to know more about our products and offers.