The loan process can be confusing, especially for small business owners. There are many loan myths that you may have heard about that just aren’t true. Here at Pacific 8, we have busted 8 loan myths, to help make the loan process simpler for you! Read to find out more.
Myth #01: All loan applications are the same. – Not true!
A loan application is not a cookie-cutter approach where all you need to do is fill in the blanks and then it’s done. It’s a process that will help lenders gain trust from their borrowers as well as understand who to loan money to. The lender should be able to tell if your business will succeed based on how thorough your loan application is. This doesn’t mean that only detailed loan applications get approved; every borrower has different circumstances, and many variables can impact whether an application gets accepted (there’s much more than just financials). If this myth were true, then there would never be any reason for banks ever rejecting loans because they’d all be the same.
Myth #02: You need perfect credit to get a loan. – False!
While having good credit does help, it’s not always necessary to obtain a loan. There are many different types of loans available, so even if you have less-than-perfect credit, there’s likely still a loan option that’s a good fit for you.
Myth #3: Lower interest rate means I pay less interest – not necessarily.
Time is usually the most expensive component of borrowing. The longer the term, the more interest accrues. Consider a $1M loan @ 2% for 10 years. In simple interest terms the interest payable will be $200K (@$20K/year). The same $1M loan @10% for 1 year using the same method, the interest payable is $100K. Of course it’s important to get a low rate and pay the loan off as quickly as possible.
Myth #04: Loans are always expensive. – False!
While some loans may come with higher interest rates than others, there are many affordable loan options available if you shop around. Don’t settle on the first loan offer you receive; take the time to compare interest rates and terms from different lenders until you find one that’s a good fit for you.
Myth #05: A loan is a loan, plain and simple – False!
Loans come in many varieties with different interest rates, terms and repayment options so be sure to understand exactly what you’re getting into before signing on the dotted line. Regardless of whether your client obtains a business loan from a bank or alternative lender like Pacific 8., it’s important that everyone knows about funds and how to use them in the most effective way possible.
Myth #06: A loan is the only way to get money for my business. – False!
While a loan may be the most common way to obtain funding for a business, it’s not the only option. There are many ways to get money into your business, including grants, angel investor funds and venture capital. So, if you’re having trouble qualifying for a loan or don’t want to deal with the hassles of repayment, don’t despair; there are other options available that can help you get your business up and running.
Myth #07: I must use my loan immediately after getting it. – Not true!
You can use your loan however you’d like, whenever you’d like. Just make sure you keep track of when the loan needs to be repaid so you don’t end up in a bind down the road.
Myth #08: I can only get a loan if my business is doing well. – False!
Even businesses with less-than-stellar credit ratings can obtain loans if they can provide evidence that they’re capable of paying back what’s being loaned. So don’t give up on your business dreams just because you think getting a loan is out of reach; there are lenders available who are willing to work with you no matter what your credit score looks like.
Get in Touch with Pacific 8
So, there you have it – 8 commercial loan myths busted! If you’re still confused about any aspect of obtaining a loan for your business, don’t hesitate to contact Pacific 8. We can help guide you in the right direction while answering all your loan-related questions.
