Small business loans – 8 myths and facts about them

“You’ll be filling out forms forever” and “It’ll take them years to approve your loan,” are just two of the widely spread but totally untrue myths about small business loans.

By: Hitesh Khan/

There are numerous loans programs to assist entrepreneurs with starting, managing and growing their businesses. Thousands of businessmen are turning to such resources because financing remains a formidable challenge.

However, many myths about small business loans still exist,

The following are 8 common myths about small business loans.

Myth #1: My business is successful and doing well and I don’t need a loan.

Fact: Many small business owners use loans to help rapidly growing businesses or to help fund change in ownerships for businesses.

The benefits include of taking loans when your business is successful includes increased cash flow, and flexible repayment options (such as monthly installments of principal and interest and no ). balloon payments

Myth #2: Government programmes help people with bad credit get a loan.

Fact: All Government programmes for small business loans require a good business plan (showing good cash flow) and good credit history.

Government programmes may provide assistance when a borrower’s collateral may not meet conventional lending standards and may helps overcome some financing challenges, but not bad credit.

Myth #3: The Government programmes itself lends money to a small business owner.

Fact: The lender (bank, financial institutions, non-bank lender) actually lends the money.

The Government may guarantee a portion of the loan which include funds for the purchase of existing land and buildings (owner-occupied), expand or modernise facilities, purchase machinery, equipment, leasehold improvements or inventory, and finance increased receivables and augment working capital

Myth #4: Government backed loans are grants won’t have to be paid back.

Fact: Government backed small business loans are not grants.

As such, the lender will expect that the loan be repaid

Myth #5: Any small business can get a loan.

Fact: Lenders make sure that the business is independently owned and operated; and is not dominant in its field and meets.

As such an experienced lender can help determine if your business is eligible

Myth #6: It will be piles of red tape and tons of paperwork.

Fact: Well, it CAN have a lot of red tape but an experienced loan specialists can handle all that for you.

Most lenders have worked diligently over the last several years to streamline their approval process. Today, complete loan applications are typically processed by lenders within 14 business days. Borrowers who work with  loan specialists, can get their loans closed even more quickly.

Loan specialists at iCompareLoan are deemed to be experts in getting small business loans in the quickest time possible.

Myth #7: SBA loans come with lots of fees and high interest rates.

Fact: There is a cost to small business loans.

Lenders typically charge 2% of loan amount as processing fees. As far as interest rates go, lenders are limited by legislation as to how much interest a they can charge to a borrower. A borrower also has the benefit of lower down payments, flexible payment options and no balloon payments.

Myth #8: There is no need for collateral for small business loans.

Fact: Lenders are required to take all available collateral and take a blanket lien on all company assets when making an small business loan.

Government backed loans guarantees a large percentage of the loan, but it will honor that commitment only if the borrower is willing to put his or her neck on the line, too. But it is important to know that with some lenders you don’t have to have dollar-for-dollar collateral available for your loan.

A lender can make a small business loan even if the borrower doesn’t own a private apartment (or even if the borrower has a private apartment but no equity in it). But to clarify, if you do have collateral available, banks will take it.

While small business loans are sometimes viewed unfavorably in the lending world, many of the myths and misconceptions surrounding them are based on rumors and mis-truths. In reality, small business loans can be a viable option for many business owners.

However, navigating through the small business loans maze lending can be tricky. After all, providers of loans to entrepreneurs have to abide by quite a few rules and regulations set by the Government.

If you think a small business loan may be right for you, it’s best to work with an experienced loan specialist like iCompareLoan who understands the ins and outs of the agency and small business financing.

How to Secure Personal Loans Quickly

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