Small business lending is a relatively new financial solution for startups to fund themselves without putting their real estate or personal assets at stake. However, it has become a victim of some rumours and misinformation, which are encouraging misinterpretation among small business owners and even causing them to doubt their own eligibility.
In order to make sure that startup owners do not miss out on any effective finance opportunity, it is imperative that they are educated about the truth behind these rumours, some of which have been described below:
New Companies Don’t Qualify For Small Loans
Before an entrepreneur can turn his or her business venture into a success, they first need to get it off the ground. Most startups usually resort to angel investors or venture capitalists for funding, and one of the primary reasons for this is the conjecture that they cannot qualify for a small loan. They think that small lending requires a business to have extensive experience. However, there are many lenders that offer startup loans without asking for any business credit history.
Online Lenders Have Unreasonable Rates
Since the sector of small business lending is new, many people are skeptical of it. However, the ones accused of charging high rates are actually those who work with risky borrowers. It is not possible for a lender to blindly trust their clients and give out money without any security. In their case, high interest rates act as their indemnity. Still, there are many financing companies that provide unsecured and quick business loans in Australia at single-digit rates.
Startup Financing Firms Want Good Credit Score
This is a rumour that only people living under the rock would believe. Nowadays, most lenders examine cash flow statement, revenue history and other essential financial documents of a company to determine its loan eligibility. Credit score has become more like a thing of the past. Such vital pieces of information convey a business’s image in such a way that credit score alone cannot.
These are some of the rumours that startup owners need to steer clear off when thinking about applying for small business loans in Australia. Otherwise, they would be letting go of effective opportunities to finance their trade. If you have been thinking about resorting to small business lending for expanding your business, make sure you bear in mind the above mentioned false assumptions.