6 min read

4 Myths About Small Business Loans

By Ashley Lemus on Thu, Jun 16, 2016 @ 02:41 PM

Lending standards have significantly changed since the rise of alternative lenders.  Not only is it much easier for small business owners to qualify for a business loan, but it is actually easier for them to apply, as well.  

1. You Can’t Get a Loan if You’re Denied by a Traditional Bank

Although, this may have been true during a point in time when your traditional brick and mortar banks were the only financing option available to businesses, that certainly is not the case today.

Big banks tightened up their lending standards, after the financial crisis in 2008, making it nearly impossible for new entrepreneurs to get the financing they needed. Luckily, that financial void was quickly filled with a new group of alternative lenders, who now give small business owners more financing options than ever before.

 

2. You Have to Have a Perfect Credit Score

While your personal credit score will be weighted pretty heavily if you're applying for a traditional bank loan, the banks are no longer a small business owner's only option.  Thanks to these many other options available, a less-than-perfect credit score won't completely ruin your chances of getting the financing you need.

Although almost every lender still considers your credit score before approving or denying your loan application, they often have more lenient standards. Today many lenders even prefer real-time data to your credit score—they consider your business checking account, Amazon Sellers account, QuickBooks, and the like.

The credit score does, however, still remain one of the most important factors in most loan applications. If your credit score is on the lower end, you should always take the steps necessary to improve it right away.

 

3. You Won’t Be Able to Get a Small Loan

Since the underwriting costs are the same to the lender, regardless of the loan amount, smaller loans mean less of a return.  This means banks don’t consider the costs to be worth it and, typically, aren’t interested in these smaller loan amounts.

However, thanks to the Small Business Administration, getting a loan is no longer a problem for business owners who have low capital requirements and don’t need a lot of money. With their Microloan program in particular, the SBA offers loans for as little as $500 to $50,000. Interest on these loans range from 8 to 13%.

Thanks to similar programs such as this, if you need a small amount of working capital to pursue a business opportunity, you have more options than ever.

 

4. It Takes a Long Time to Get a Small Business Loan

Receiving the financing you need for your business does not have to be a long, drawn out process.  Your business could receive funding in as little as two days by finding an alternative lender online and filling out a loan application within minutes. Often times convenience comes with higher fees, but waiting for funding is the last thing you'll want to do if you’re looking to grow your business quickly, or need money in a pinch.

Many times how quickly you can get a loan depends on the type of loan you’re evaluating. Fast cash is expensive cash, so if you need money fast, but want to see if you can qualify for a lower-cost, longer-term product, make sure you’re coming to the table with your financial information completely prepared.

 

 

Although these myths were once true, alternative lenders have changed the lending game for small business owners as a whole. Now it’s much easier for entrepreneurs to get the funding they need in faster times than ever before.

 

Looking for more information that will certainly help grow your small to medium-sized business?

 

We would love to speak with you about how Klear Systems can benefit your organization.

Give us a call at (949) 681-8135,
email us at info@klearsystems.com
or complete the form below and we’ll reach out to you.

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Ashley Lemus

Written by Ashley Lemus