Whether it’s to pay for new machinery, or just to make the next step up in a bid to cater for those bigger contracts, expansion is part and parcel for any business.
In relation to larger companies, it would be fair to say that the financing options are bordering on endless. However, further down the spectrum and it becomes a little tougher – and small businesses really have to fight to secure that elusive funding.
However, it’s not always as difficult as some of the press might make out. While small business loans can be difficult for some businesses, for others they are surprisingly easy. To highlight the point, let’s take a look at some of the biggest myths that blight this form of finance.
Myth #1 – Ask for more money – and immediately reduce your chances of getting it
This is one of those misconceptions that almost stands to reason. After all, if you ask for more money, you are putting more of the banks money at risk.
However, there is a flip side. More and more banks are starting to prefer business loans of the larger variety, for the simple reason that the profits for them are going to be higher. Sure, they’ve still got to consider all of the risk factors, but on the whole you shouldn’t worry too much about the amount you are asking for. It’s all about your ability to pay it back.
Myth #2 – It’s not just about the interest rate
The interest rate is supposedly the be-all and end-all when it comes to business loans. Well, let’s put something out there – it’s not the case in the slightest.
Of course, you’re not going to be taking out a business loan with an almightily high interest rate. At the same time, a higher interest rate can sometimes be more favorable. When you take a look at the likes of the total cost of the loan, the total duration of it and exactly what you can use the loan for it all becomes clear.
After all, you might have netted a record-breaking interest rate, only to be told the money can be used for a specific purpose that differs from your requirements.
Myth #3 – It’s all about the credit rating
This is another one of those myths that is bordering on the historic. In other words, while it may have been true several years ago, banks and other lending establishments are taking a much more modern view on the situation now.
If you approach a lender with an utterly terrible rating you are naturally asking for trouble. However, there is much more openness to these poorer ratings and while the banks might not necessarily be as keen, there are a whole range of other lenders that design packages with businesses like these in mind.
As such, even if your credit history from the past might be indifferent to say the least, don’t immediately discount your chances. There are more options than ever before – and these can all help your business grow.