With an unsecured business loan, the borrower doesn't have to put up any business assets as protection. If you stop making payments, the lender cannot penalise you by taking assets like your house or car. So what are the myths about the lending options out there and what as a business owner should you know when seeking out the right lending option for your business? The trouble is, there is so much information available that sometimes it can be hard to know what to trust and what to stay away from. Similarly, some people have the wrong idea about unprotected business loans. When is it that you can trust what is on offer in the lending space, and when should you steer clear? Here are four myths about unsecured business loans debunked.
Myth 1: Only businesses that are in financial trouble need loans
Contrary to what most people think, businesses don't only seek out loans when they're having financial trouble. Actually, savvy business owners also take out loans when they want to grow. Loans can be used to fund growth strategies, create new product lines, and fund expansions. In this way, business loans can be used strategically to enhance a business, rather than just plug holes.
Myth 2: To get a loan, you need to have good credit
While a good credit score can make it easier to get a loan, it's not necessarily the only thing that counts. Lenders also assess performance, cash flow, and business prospects in order to assess risk. There are also different kinds of loans like asset-based loans, which don't depend as much on credit scores.
Myth 3: Businesses can only get loans from banks
Even though banks are the most common source of business loans, they are not the only ones. There are different ways to get money from alternative lenders, credit bureaus, and private lenders. The key is to do thorough due diligence to find a lender that is reliable and fits the specific needs of your business. A Cash Advance for example is an alternative lending solution tailored to retail businesses allowing the merchant to pay as they trade. This means that repayments are made directly in line with turnover and are far more manageable for cyclical businesses.
Myth 4: Unsecured business loans are only given by banks
The money market has really evolved over time. This is an exciting time in the lending market with so many bespoke lending products available for businesses. Business owners no longer have to only get money from traditional institutions. Rather, there are a lot of places to get unsecured business loans with reasonable interest rates or other repayment solutions that aren’t structured with traditional interest. At Merchant Capital, repayments are not structured with an interest rate, rather a small agreed percentage is held back from every future card transaction until the loan is fully repaid. This is far more attractive to many business owners as they are not beholden to interest rate fluctuations and large fixed month-end payments.
Myth 4: The process of applying for a loan is always long and time-consuming
The process of getting a loan is typically a daunting one. Or rather, it used to be and today it is not necessarily such an arduous process. While traditional bank loans may require a lot of paperwork, alternative lenders use technology to remove the friction of the application process, streamline processing times and allow for fast online turnover times, in as little as 48 hours.
The bottom line
The unsecured lending space has really evolved. Technology, and changing business needs have meant that alternative lenders have needed to create bespoke lending options that put the customer first and provide simpler ways to fund their small businesses, fast. In this way, Merchant Capital has really challenged the lendscape in game-changing ways, so to fund your small business in the next 48 hours, contact Merchant Capital today.