Business lending is the credit facility availed to meet urgent requirements of a business. With growing accessibility to information available online, many business owners search for business loans online. For every bit of genuinely helpful advice, there is a certain amount of misinformation and myths surrounding business loan online. Unfortunately, this misinformation can give small business owners a false sense of eligibility.
Let’s separate fiction and reality! Read on to know five common myths that surround business lending in India.
Approval Takes a Long Time
The most common question businesspeople have when applying for a business loan is, how fast they will get cash in hand? Many borrowers believe that availing a small business loan can take months. But this piece of information is outdated. With the new online application process, the loan application form is processed and approved within a few hours. Additionally, the amount is disbursed in just three days.
Only CIBIL Score matters in Loan Approval
This myth is carried over from the traditional lenders! However, this is not true for the new-age lenders operating in the market. These lenders such as NBFCs and Online lenders give equal weight to the business’s revenue history, cash flow statement, and other financials to determine the loan eligibility. All the information paints an accurate picture of the borrower and the business’s financial standing. Thus, a credit score cannot convey all this alone.
It is still essential to ensure to have a good credit score, which ultimately reflects the financial history. The CIBIL score can be improved by making debt payments on time and managing credit usage responsibly. Additionally, it is also imperative to check credit reports regularly for accuracy.
Online Lenders are not Trustworthy
The online lenders are relatively new in the market, but they have proved themselves. Not just online lenders, but RBI registered NBFCs as well offer their services online for the convenience of the borrowers. They offer business funding at customer-friendly terms and conditions and minimal documentation. Small business owners who are turned down by banks can also get financing from NBFCs and online lenders.
Collateral is Necessary
Collateral is the security that is pledged against the loan amount. It backs the loan amount. If the borrower is not able to repay the loan amount, the lender will get permanent access to the asset hypothecated, and he can sell it off to recover losses. Many borrowers believe that collateral is necessary to get business funding. However, many lenders in the market offer unsecured business loans.
Small Loan Amount is not Available
Unavailability of funds should never stop a business from getting successful. Many business people think that loans are usually of big amount. Small loan amounts are also available, ranging from Rs. 1 lakh to Rs. 5 lakhs. The SME loans are designed to meet the needs of SMEs in India.
The lender’s ultimate concern is whether the borrower will be able to repay the loan. So, the borrower should paint the best possible picture of his repayment abilities through financial and personal documents. And now that the five myths about business lending are busted, you can make a well-informed choice.