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5 Common Business Loan Myths Debunked

A loan is one of the most common ways in which businesses finance their operations. All businesses require capital. Whether you’re trying to get your new business up and running, or if you have an established business, you’ll need capital to perform its operations. A business loan will allow you to borrow money from a lender for this purpose. There are several business loan myths, however, that you shouldn’t believe.

5 Common Business Loan Myths Debunked

#1) Only Offered By Banks

While banks offer them, business loans are offered by alternative lenders as well. Alternative lenders are private lenders that provide financing solutions to businesses, and in some cases, consumers. When compared to banks, alternative lenders have lower requirements for obtaining business loans.

#2) Requires a Good Credit

Contrary to popular belief, not all business loans require good credit. You can oftentimes obtain a business loan with bad credit or no credit. Alternative lenders, for example, typically offer secured business loans to applicants with bad credit or no credit. You’ll have to provide collateral when obtaining a secured business loan, but you won’t need stellar or otherwise good credit.

#3) Only the Interest Rate Matters

You should certainly consider the interest rate when choosing a business loan. Whether fixed or adjustable, the interest rate will determine the cost of borrowing. You’ll have to pay the principle of the business loan as well as the interest. But the interest rate is just one factor to consider. You should also consider the length or term of the business loan, repayment schedule and underwriting fees (if applicable).

#4) Always Requires a Personal Guarantee

Personal guarantees are common with some types of business loans. If you obtain a business loan from a bank, you may be required to make a personal guarantee. With a personal guarantee, you are essentially vouching that you, personally, will repay the loan if your business is unable to. Alternative lenders, however, don’t always require a personal guarantee. You can obtain a secured loan from an alternative lender without jeopardizing your personal assets.

#5) Same as a Line of Credit

A business loan isn’t the same as a line of credit. They both involve borrowing money from a lender. With that said, a business loan will provide you with a fixed amount of capital with which to finance your business. A line of credit, conversely, will provide you with a revolving account balance. You can draw money from a line of credit, and as you pay it down, you can continue drawing money from it.

This article was brought to you by Intrepid Private Capital Group – A Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.

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Intrepid Private Capital Group • November 18, 2021

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