Congratulations on finally deciding to take the next step in growing your dream business. Small business loans can provide you with the resources you need to get your startup going. And in order to ensure that you make the correct decisions in terms of borrowing money, we’ve decided to debunk some of the more common myths associated with small business loans.
MYTH: It’s All About Interest
Acquiring a loan option with the least possible interest can certainly help make the loan more manageable. However, it’s just one of the many factors to consider when entering into a loan agreement. Business News Daily advises keeping in mind other equally relevant factors such as what you can use the loan for, and how soon you need to repay the money. Getting lower interest rates is ideal, but sometimes, you need to opt for higher interest rates if it gives you more time to pay off the entire loan. Also, the other terms of the loan will determine whether or not it’s the right choice for your business and its projected growth.
MYTH: Get as Much Money as Possible
Our own Daniel Smoot reminds aspiring business owners that more money also translates to being saddled with higher than necessary payments. Smoot also explains that interest on higher loans will add up over time. Instead of borrowing as much cash as possible, borrow what your long-term business strategy requires, which brings us to our next myth.
MYTH: You Don’t Need a Financial Advisor for Small Business Loans
Having an accountant or financial advisor at your side will ensure that what little money your business can afford to borrow actually works towards your long-term goals and projections. The growing demand for these types of financial professionals is indicative of their role in ensuring the growth of small to medium businesses. A long form post by Maryville University that touches on the future of business details that corporate and financial operations are expecting to see 632,400 more jobs become available by 2024. The article also states that these jobs in accounting, financial management, healthcare management, and data management are all projected to grow faster than the national average for all other jobs in the market. In line with this, Business Insider reveals that the global peer-to-peer lending market is also expected to balloon by up to $897.95 billion by 2024. This is largely driven by lower-interest, peer-to-peer loan schemes from non-traditional sources – best approached through the lens of an accountant/financial advisor. Which brings us to our last myth.
MYTH: Banks are Your Best and Only Option
This may have been true about ten or twenty years ago, but today, there are many other small loan options available for budding entrepreneurs. The aforementioned projected global growth of the peer-to-peer lending market is highly indicative of the diverse set of options you can consider. Recent technological advances have allowed alternative loan providers to have access to verification systems and low overhead costs, in turn allowing them to offer lower-interest loans compared to traditional banks and loan providers. When in doubt, it is best to consult a financial advisor.
Post written for financefactory.com by Lisa Diaz