Before you dismiss the possibility of taking on debt to build your business, make sure you’re not being misled by any of these widespread myths:
Myth 1: Debt is bad for your business
Launching a new business or growing your existing one isn’t easy. It takes risks and sacrifices to reach a point where you’ve found your footing and achieved relative stability. Don’t assume taking on debt will worsen your financial state and make that stability even harder to achieve. According to financial experts like Samantha Novick of Score.org, taking out a loan isn’t necessarily bad for your business. While misusing loans can worsen any company’s financial state, prudent and responsible debt-handling can help boost your business’ success.
Novick stresses that debt isn’t bad for small businesses, pointing out that — according to the Small Business Administration’s Office of Advocacy — three-quarters of young businesses’ funding typically comes from loans and lines of credit. “If debt killed young businesses, the majority of young businesses would die,” she states.
Myth 2: It’s nearly impossible to get out of debt
If you are considering taking out a loan and going into debt, you may be concerned that you’ll always be fighting an uphill battle trying to repay it — especially if the market doesn’t cooperate like you were anticipating it would. According to Fundera Ledger founding editor and VP Meredith Wood, this is a fairly common situation for small businesses and isn’t as dire as you may assume. Following certain practices make it easier — and more likely — for your business to get out of debt. Her recommendations include assessing your budget, creating a repayment plan, trimming expenses, and finding other ways to increase income.
Myth 3: Only special applicants can qualify for loans
No two businesses are exactly alike, so don’t compare yourself to other companies and assume you won’t qualify for a loan because you’re not as big, as established, or as disadvantaged as other applicants. You don’t have to be the perfect candidate to receive a loan. Wood points out assuming you must have perfect credit to get a small business loan is “one of the bigger business financing myths out there.” There are numerous types of financing options for aspiring businesses, so don’t think you need a “squeaky-clean credit history” to be accepted.
Myth 4: Getting a loan is a lengthy, complicated endeavor
If you need cash fast to remedy your immediate financial situation or take advantage of a sudden growth opportunity, you’re probably concerned the approval process will be so tedious and drawn out the opportunity window will close before you get the funds. The staff of Entrepreneur Media, Inc. debunks this myth, pointing out innovations like online loan applications and digital consultation have vastly sped up the approval process. “Once you hit “submit,” the approval practice is very efficient. Don’t let the fear of a long approval process hold you back from seeking a loan,” they advise.
The best way to dispel myths like these are to receive a consultation. Don’t assume your business can’t afford to take on debt or qualify for a loan before discussing your situation with a financial officer who can assess your needs and recommend a plan.