Business Finance Myths
As small businesses hopefully begin to overcome the effects of the pandemic, they begin to look ahead to 2022 and look for opportunities to grow and develop.
And as part of the successful growth and development of any business over the next 12 months, access to finance will play a crucial part. Whether it’s for working capital, business expansion, new marketing activities, or upgrading premises, business owners need to know where and when to access the finance that they need when they need it.
However, there are some myths and misconceptions around finance, with business owners often concerned about their ability to successfully apply for a loan.
At Funding Track, we come across these concerns on a daily basis, so we have decided to publish a series of blogs to dispel some of the myths and misconceptions surrounding access to finance.
This week we start with small business loans. Business owners are not always clear about what is “fact or fiction” when it comes to applying for a small business loan and the benefits it can provide them.
So let’s dispel some of the myths.
Myth 1: You need a perfect credit score to obtain a loan
This is one of the biggest and most common myths about small business loans. In reality, even businesses with a poor credit history can qualify for a small business loan.
Obviously, the better your credit rating is, the easier it is to borrow, and you can choose from a wider variety of options. However, you certainly shouldn’t assume that a business loan is off-limits to you just because your business does not have a perfect credit score.
To be clear, there are lenders who will lend to businesses that are for instance in the process of ‘re-building their credit. These loans, tend to attract a higher interest rate, but if your business needs funding to grow, then they are definitely worth considering.
A good finance broker is a must, as they can help you find the best loan for your business in its current situation.
Myth 2: Only High Street banks offer business loans
It is often assumed that the only option for a business loan is to approach one of the high street banks. Whilst of course the high street banks do offer business finance, there are many other options.
There are lenders in the market who specialise in lending to specific sectors of the business community, or who have specific products that they offer such as merchant cash advances, asset finance or invoice finance to name but a few.
As a business owner, do your research and find out what the various funding options are and how they can best help your business.
Myth 3: Obtaining a start-up loan is almost impossible
Almost every small business when starting up needs some kind of funding to get on its feet. Again, there are specialised lenders who will provide loans to business that are in the start-up phase or perhaps in their very first year of trading.
A lender is likely to want to see your business plan along with detailed financial information. However, the business plan you prepare doesn’t have to be your version of ‘War and Peace’.
The key information to provide is a summary of your plans for the business, all the necessary financial information together with an explanation of how the numbers have been arrived at. And of course, the lender will ask you for any other additional information they require as the application progresses.
Myth 4: Only Businesses that are failing need a small business loan
Many small business owners may see applying for a cash injection to support cash flow as a step backwards. But in reality, it can play a role in accelerating your business and helping you achieve your goals.
You may need to expand your business premises, invest in new technology or equipment, or hire new team members in order to help build the business. And in order to grow, ensuring the business has enough cash is crucial. A business loan can be an important ‘piece of the jigsaw’ in both strengthening a business’s current position as well as preparing for growth.
Consequently, raising finance to support and strengthen the cash position within the business should not be seen as a backward step, but rather a step towards growth.
In our view, if you feel your business would benefit from a correctly structured business loan, the first step is to find a reputable finance broker. If you’re not sure where to source a good broker, start by going on the website of the National Association of Commercial Finance Brokers (NACFB).
They have over 2,000 members who as part of being a member, sign up to a Code of Practice, which provides you with the assurance that you are dealing with an expert. They will take the time to understand your specific needs and requirements and can help you find the right loan for you and your business.
At Funding Track, we would of course be delighted to help you source the right funding solution for your business, so please contact us today to find out how we can help your business grow and succeed.
T. 020 3857 3030