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Starting out a new business or even getting to the next stage of expanding the company, can be a scary prospect. This is not helped when you are looking to source additional funding and may have some commonly held preconceptions about business loans which are not based on fact. In order to debunk some of these myths and misconceptions, let’s look at the top five so that you are in possession of the full information to help decide which loan is best for your business.
1. Only banks can provide business loans
This is something that especially a new business owner does not realise, in that there are alternatives to the banks when it comes to a business loan. The banks certainly were the traditional lender of choice but today there are a number of other lenders around. If looking for a mortgage broker, Melbourne specialists are able to provide support and advice with a tailored loan for a new or existing business. Alternative lenders can also review applications for smaller amounts which is something that the more traditional lender may not offer.
2. Only failing businesses need a loan
A business loan is not a prop or crutch to keep up a failing company but should be considered as part of the business plan and process as companies grow and develop. Loans can be considered for new equipment or technology, for example, and should be seen as an investment. Bigger premises may require the support of a mortgage broker in Melbourne. Firms that are keen to move on to the next phase of their development, whether it is a satellite site or a new head office, can benefit in a number of ways from a loan. Obviously, repayment of the loan will need to be factored into the company outgoings but taking out a loan is definitely not a sign of failure.
3. Loan applications are very time consuming
The process of loan application due to the rise in online financial technologies has speeded up the process. It does not mean that the lender is less than diligent, and neither should the borrower be when getting together all the relevant information to submit to their lending specialist. However, with access to the internet, a professional lending specialist will have a clear and transparent website with details of the different loans available along with contact details.
Online applications allow the relevant details to be gathered by the lending specialist so that the potential borrower can apply online without moving from the comfort of their armchair. The approval process is speeded up which means waiting time to access the funds also is reduced. Compared with traditional bank lenders, the loan approval rate from alternative lenders is quicker.
4. No perfect credit rating, no successful loan application
This may be the case with the more traditional form of lenders, but it is worth discussing the requirements for a loan with another lending specialist. This reason being, they will want to know more about the cash flow of the business, including annual turnover, to take a balanced view of what you can afford in terms of repayment. There may be very good quantifiable reasons why at the current time, a business credit rating has changed, which the lender will be able to consider. Therefore, it is important to ensure transparency around current financial records, business plans and the budget in order to secure the loans needed to take the company on to the next phase.
5. Small businesses don’t qualify for larger loans
Just because the business is a small to medium enterprise, does not automatically disqualify them from approaching a lender with a request for larger amounts. When considering this from a business perspective, it does make financial sense because even the traditional lenders such as the banks prefer lending higher sums as it makes more profit for them in the long run.
What is important is if as a business, you can demonstrate that you are a sound prospect as a borrower. Evidencing why the loan is required, the impact it will have on the returns to the business and evidencing repayment costs is key. It goes back to ensuring that cash flow can withstand loan payments and businesses should only ask for as much money as is needed.
Having a sound business plan in place will back up the need for the amount requested. Smaller companies may need to grow quickly due to the sector they are in, e.g. software consulting or health care for example, and lending specialists have experience of working with pre-revenue or low revenue new companies. They are also very happy to discuss all requirements before the business owner makes a final decision. So, get in touch with a mortgage broker Melbourne based lending specialist to find out how you can ensure your company meets and exceeds its full potential.
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