1. Approval takes forever
Whether you’re itching to move forward with a new business idea or you need cash quickly to cover an unexpected expense, one of the most common questions business owners have when applying for funding is, “how fast can I get cash in hand?”
You may hear from well-meaning friends and relatives that getting approved for a business loan can take weeks or even months, but that information is outdated. With new online loan applications, an organized business owner can complete her application in less than an hour, and it can be reviewed and approved within 24 hours of submission.
2. New businesses never qualify.
The startup funding quandary is a difficult one. You need an established business to secure funding, but you need cash in hand to get your business off the ground. Many startup entrepreneurs assume that they need to be in business for a few years and have established business credit before they can qualify for a loan.
Applying for a startup loan will involve more scrutiny into your personal finances than other types of business loans. Your personal credit score will be the most important part of the application. You may also be faced with less favorable rates than you would receive as an established business.
3. Online lenders are con artists with unreasonable rates.
We get it. The online alternative lending market is relatively new, and people are skeptical of new things. Unfortunately, many unscrupulous online lenders and brokers have engaged in predatory and dangerous lending practices, giving the entire industry a bad rap.
But in reality, some alternative lenders operating online offer single-digit interest rates. Those offering higher rates often are working with borrowers who are considered risky. Online lenders regularly consider a wide variety of borrower credentials outside of just the traditional credit report and score. Business owners who were turned down by their bank can frequently find the funding they need online.
4. Loan officers only care about your credit score.
This myth, carried over from the outdated traditional bank model for loan approvals, can leave business owners with less-than-stellar credit feeling hopeless about their funding prospects.
Many lenders will now give equal weight to your company’s revenue history, cash flow statement and other financial documents in determining your loan eligibility. Even so, before applying for a business loan, it is still important that you take steps to make your credit report and score the best possible reflection of your financial history.
5. Approval is determined by a heartless algorithm.
Once upon a time, entrepreneurs seeking small business funding could walk into their local community bank, build face-to-face relationships with managers and loan officers, and be confident they understood the whole picture behind their loan application, including both cold hard numbers as well as the more intangible elements of their qualifications as borrowers.
If you’re concerned about certain elements of your loan application, like your credit score, take the time to flesh out your business plan, fully explaining how the funds you are borrowing will be used and how this investment will lead to a successful business.
Ultimately, your lender’s main consideration is whether or not you will make your loan payments on time, every time.
If you do your research, stay organized, and can clearly and concisely convey this information to lenders through your loan application, your chances of being quickly matched with the a loan to meet your business needs is tremendously greater.
By: Jared Hecht