You can’t exactly grow a business if you’re broke.
Success requires access to cash—and a lot of it. Not only do you need to be able to cover your run-of-the-mill operating expenses, you also need cash to invest in growing your operations (think developing new products or expanding into new markets).
For many small business owners, “loan” is a bad word—to the point where some of them won’t even think about getting loans in the first place, even when cash is tight.
But are loans really so bad? What if what you thought you knew about loans was wrong?
Myth #1: When you need a loan, a bank is your best bet.
Common sense might tell you that, when you need outside funding, you’re most likely to find it from a traditional financial institution. But according to a recent study, big banks only approved 23% of loan applications while small banks approved 48.7% of them.
Unfortunately, if you apply for a loan through a traditional bank, the odds are against you getting an approval. But all hope is not lost. There are a number of alternative financial vehicles available to you, including loans from nonbank lenders, merchant cash advances, and accounts receivables factoring.
Myth #2: The loan application process is incredibly time-consuming.
Assuming a bank does in fact sign off on your loan, the whole process can take upwards of two months before money is actually deposited in your bank account.
This isn’t exactly ideal. When small business owners need money, they need it quickly.
The good news is that nonbank lenders issue loans quickly. The application process takes about 15 minutes, and if you’re approved, money is available to you within 24 hours.
Myth #3: You can’t get a loan if you have bad credit.
As noted above, banks aren’t known for approving a ton of loans. That being the case, they tend to only approve loans for businesses that have perfect credit scores.
It’s true that these traditional financial groups will almost certainly not lend you money if you have bad credit. But you’re not completely out of luck. Nonbank lenders, for example, are more interested in your company’s cash flow situation and how much revenue you bring in each year. Assuming your business is generating steady revenue, you’re likely to get approved for a loan.
Myth #4: In order to qualify for a loan, you have to have been in business for years.
Ever the picky lenders, traditional banks tend to lend to small business owners who have been in business for a number of years. Banks try to minimize their risk as much as they can. Businesses that have long track records of success are considered less likely to default on their loans.
Unlike their more traditional counterparts, alternative lenders have no problem lending money to newer businesses. If you’ve kept your doors open for at least a year and have a steady customer base, nonbank lenders will almost certainly give you the cash you need to grow your business. Keep in mind, however, that interest rates attached to alternative small business loans will be higher because they’re riskier for lenders.
Myth #5: Only failing businesses need outside financing.
Many small business owners think that applying for a loan signifies that their company is failing.
That couldn’t be further from the truth: According to a recent study, half of small businesses run into cash flow problems at some point or another. While cash shortages can be tricky to navigate, they won’t destroy your business unless you let them.
You need cash to grow your business—it’s as simple as that. Yes, securing a small business loan will cost you money and force you to take on debt. But that money can help your business reach the next level. Among other things, you can use a small business loan to:
Invest in new technologies, equipment, or property
Remodel existing locations or move into new ones
Cover all of your bills and make payroll each month
Develop new products
Target new customers
Launch a new marketing campaign
In a perfect world, you’d never need to apply for a small business loan because you’d have so much cash you didn’t know what to do with it. But as every small business owner knows, managing cash flow can be difficult—particularly when you’re just starting out.
The good news is you can grab a small business loan from an alternative lender in hardly any time at all. Invest that money in growing your operations however you’d like, and your company will become that much stronger. What’s not to like?