Want to know more about borrowing money for your business, but don’t know where to start your research? There are a lot of misconceptions surrounding business loans, who they’re for, and how they can help your businesses. Here we discuss six common myths about small-business loans and explain the truth.
Banks are the only place you can borrow from
False! Borrowing money from banks is common. However, it’s not the only way to secure a loan – there’s a thriving market of non-bank lenders. While both banks and alternative lenders are valid places to borrow from, there are a plethora of benefits to opting for a non-bank lender.
Loans are for businesses that are struggling
Many business owners think that loans are only for businesses that are on the brink of collapse. This is a completely false assumption; business loans can be helpful in a multitude of ways, from purchasing new equipment to hiring new employees. Loans don’t just exist to help businesses escape financial trouble – they can go towards anything you need that will help your business grow and succeed.
Business loans aren’t worth the interest they accrue
Have you thought about applying for a loan but decided against it because you’re worried about the interest you might have to pay? Of course, no loan is interest free. However, when you borrow for your business with Zip Co, you only need to pay interest on the funds that you actually withdraw. Additionally, we don’t charge early repayment fees, so you can pay off your loan faster without being penalised.
Applying for a loan takes a long time
A long, drawn-out application process is a major reason that many business owners avoid looking into business loans. While this may be true for borrowing from big banks, the same can’t be said for alternative lenders. When you apply for a Zip Business loan, the application process is simple and fast, and we make a decision quickly so that you can hear back from us sooner rather than later.
A bad credit score means you can’t get a loan
If you’re hesitant to apply for a loan because your credit score isn’t perfect, there’s no need to stress. Alternative lenders typically look at more than just a credit score when assessing an application. Zip takes into account the full picture of your business, including cashflow, annual revenue, and day-to-day operations.
The higher the amount you ask for, the less likely you are to secure the loan
There’s a common misconception that if you ask to borrow a higher amount of money, you’re less likely to get it. This is a really damaging myth because it often stops business owners from asking for the amount they truly need. Calculate how much money you need as well as how much you can realistically afford to pay back each month – then ask for no more and no less than that.
If you’re implementing some of these tips, such as setting up a bookkeeping system, creating a budget, or managing your cashflow, then a Zip Business Trade account could help. It’s a safe, simple line of credit that allows you to pay invoices, enjoy greater cashflow control, and see all expenses in a clear monthly statement.