Often, both start-ups and established businesses think about loans for business and follow the stereotypes and myths that have become obsolete in this area. In this article, we highlight five of the most popular myths and provide explanations to help dispel them. Before starting a new business you need to have a considerable amount of seed capital.
Quite often, thousands of capital is not needed to start a business
It is very important to be an expert in the area where you are going to start and develop a business. The key is to properly plan your expenses, investing only what is essential to your business. Of course, before starting a business, it is advisable to test the business idea itself and make sure the service (product) will be in demand and purchased. In addition, a business plan may be prepared but is often not required. Doing all the homework and providing as much information as possible to lenders can always lead to a more favorable loan decision.
For start-ups, it is better not to think about loans, but to plan growth from your operating profit
It is the safest way for a young business to grow from operating profit, but it is very slow. Often small, small businesses operate in a highly competitive environment where it is vital to actively and quickly exploit all growth opportunities. Without a loan and additional investment it would be very difficult, if not impossible. However, taking a loan requires careful consideration. First of all, never lend on other loans or installments if it does not save you, otherwise you will only increase your liabilities. Secondly, a business loan must generate more income than the cost of the loan itself with all taxes and interest.
When evaluating and calculating how long a loan will pay off
It should be borne in mind that operating profitability can be calculated for a much shorter period than twelve months. Therefore, it may happen that you will earn several or more times over a year on the loan amount.
All lending companies have similar loan terms and do not need to pay much attention when borrowing.
Different companies – different and contracts. The conditions of the lending companies can vary greatly and this can have a significant impact on the total cost of the loan. You also need to pay close attention to what will happen if your business is in trouble. Therefore, it is imperative to know the terms of payment before taking out a business loan when you are in trouble and cannot make timely payments under the loan agreement.
The questions are: will you be able to defer payment, what will the interest be, what will be the penalties? It is also important that you can repay your loan ahead of time. Will there be any additional fees for early repayment? These questions should be asked by every business loaner. Of course, however, we also recommend companies that are willing to consult and culturally communicate with you. Lending companies need to be partnered not only when their business is successful, but also in times of temporary difficulties.
Borrowing online for a small business can be unreliable
Loan documents can be signed electronically with a mobile signature. It is certainly possible to save time without going anywhere, but there are other difficulties. The security of electronic signatures is guaranteed by the Center of Registers. However, we strongly advise you to be careful and treat your private data securely, as you are responsible for your own security and money, not anyone else.
Starting a small business in the area does not have access to a loan
Very often you are faced with a situation where there is simply no place to borrow at the start of a business. In all cases, loan companies assess the customer’s solvency, their stability and credit history. In addition, you may be asked to provide more documentation to prove your ability to repay your loan on time.
So, you can also find a loan remotely via the Internet, but once you have agreed on the terms, it is always good to meet and talk again to avoid future problems.