7 Small Business Loan Myths Busted
Embarking on a business venture is not easy. Though a hard-hitting business idea is one of the prime requirements, what matters most is sticking to it, in the face of all odds. “Amid intense competition for limited financial resources, particularly small business loans, certain ventures fail to survive,” says Anil Banerjee, chief loan officer of a reputed NBFC.
As these businesses toil hard to figure out the best financing options for themselves, certain myths in the small business loan market can act as a dampener. This article attempts to raise curtains on the existing myths that can derail a successful venture.
Myth 1: Denial of Loan if Rejected by Banks
Though banks are one of the most important sources of lending for small businesses, of late, NBFCs have become a bankable source of funding for SMEs. “Cornering of bank credit by large corporate houses has propelled the demand for funding from NBFCs. Post the 2008 financial crisis, banks have tightened up their lending standards, making it very difficult for small businesses to survive their screening,” quips Anil.
RBI estimates show that of the total Rs. 26 lakh crore requirements of funds for the SMEs, banks have provided only 40%. This approach has given rise to an alternate class of lenders who give small businesses more financing options than ever before.
We, at Bajaj Finserv, fund small businesses without holding them to the same rigid scrutiny as traditional banks. Companies can avail loans up to Rs. 30 lakh at competitive small business loan interest rates.
Myth 2: Need to Put Assets On the Line
Small businesses not only differ from their bigger counterparts in terms of assets. Most often, they run from a single location and have little to offer as collateral. In such a scenario, crucial business operations may suffer due to lack of funds. Such a bottleneck is injurious to the health of small businesses as well the Indian economy.
We, at Bajaj Finserv, offer loans without any collateral. Moreover, since there is no appraisal of value of the assets, loan processing is much faster.
Myth 3: A Perfect Credit Score is Necessary
Banks give a lot of weight to a business’s credit score while lending. However, they are no longer the only source of funding options available today. Alternate lenders also consider other parameters such as:
- Financial situation of a business, including cash flow
- Experience of the managerial team
- Business plan
However, it is true that a good credit score enhances small business loan eligibility criteria and helps the business get the best possible rates.
Myth 4: It’s Risky to Approach Online Lenders
Proper research on the part of the borrower can mitigate the risk of online fraud. “Digital prudence can fetch a much better deal than available elsewhere else. The online world is an ocean where businesses can find and compare various loan options,” says Anil.
We offer the facility of online account access that enables businesses to know loan details and documentation anytime, anywhere.
Myth 5: It Takes a Long Time to Get a Business Loan
Thanks to digitization of the lending process, the days of long wait for funds are over. “Borrowers approaching PSU banks have to deal with antiquated technology that delays the loan process. Alternate lenders have taken the entire process online. This has cut down cumbersome paperwork, resulting in faster disbursal of loans,” points out Anil.
We, at Bajaj Finserv, offer a seamless and digital process of online loan approval where businesses can fund their dream projects with the click of a few buttons.
Myth 6: Disapproval of High Amount of Loan
Note that doubts kill more dreams than failure. “Funds should never be the roadblocks in a business venture. With so many options available, the question shouldn’t be how much, but how quick,” opines Anil.
Proper documentation coupled with the attractiveness of a business plan is good enough to secure a high amount of loan. While banks may set rigid screening standards and criteria before lending, we offer loans as high as Rs. 30 lakh that enterprises can use to:
- Fund expansion
- Buy machinery
- Invest in product development
Myth 7: Interest Rate is the Most Important Factor
Yes, the interest rate is one of the most important factors to consider while opting for small business loans. “It is also one of the easiest ways to get duped,” cautions Anil. He elaborates, “Through low-interest rates, borrowers run the risk of debt traps. Hence, it is vital to conduct thorough background research and take professional help to understand the technicalities of borrowings.”
If small businesses are willing to think out the box and ignore the myths, they will find that there are more borrowing options for them than ever before.
At Bajaj Finserv, we not only offer competitive interest rates but also flexible repayment options that help businesses get the most out of their borrowing exercise.