Every businessman, no matter how big or small, occasionally needs money for modest expenses or for business expansion. The businessman usually meets these expenses from his own pocket or from other sources. However, a business loan can be utilized for the same purpose. All businessmen may benefit from business loans to cover petty costs like paying staff, purchasing equipment, or paying rent as well as major expansions like establishing a factory or constructing an office.
Many businessmen have several qualms regarding business loans, especially small and medium enterprises who have never obtained a business loan. We will try to dispel these myths.
Myth-1: Only banks give business loans
Many businessmen, especially new ones, mistakenly think that only banks provide business loans, but this is untrue. Along with dozens of non-banking finance companies (NBFCs), fintech startup companies also provide such loans. Banks, especially public sector banks, give loans at affordable rates, while other institutions including NBFCs provide quick loan approval, better customer service, and other facilities.
Myth-2: Loan is available only against an asset
Small businessmen often have a misconception that financial institutions compulsorily pledge assets before loan approval. For this reason, small businessmen avoid taking business loans. They either do not have enough assets to mortgage or are afraid of losing their assets. Lenders give loans both against the asset and without the asset. Small business loans in some cases up to Rs 50 lakh or more usually do not require any collateral. Many lenders offer lines of credit, merchant cash advances and other types of loans that are collateral free.
Myth-3: Only large companies can obtain business loans
The size of the business does not matter for business loans. Many banks and NBFCs give adequate loans to small and medium enterprises. Many lenders give loans to businesses that are in the nascent stage and are not even profitable. Apart from this, professionals like doctors and chartered accountants can also avail business loans. The main concern of the lender is not the size of the business but its ability to repay the loan. Therefore, if a business is generating enough cash flow to repay the loan, then it can easily get the loan.
Myth-4: The loan process is long and complicated
Different lenders have different procedures for approving business loans. Due to the fierce competition, many lenders have made the loan process quick and easy. Now business loans do not take months to get approved. Business loans can be applied for online in minutes. Within a short period of time, the lender verifies the documents and approves the loan. In a few days, the money is transferred to the businessman’s account.
To know more about business loans or apply for a business loan, click here: IIFL Finance
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