The most recent figures from the US Census reports, there were 23 million solo-preneur businesses as of 2014. Many of these businesses were started by everyday people who had a goal of working for themselves, using their own talents, and hoping to someday create more opportunities for others. It takes money to start a business. Most experts recommend that a small business owner start out with at least three to six month’s salary set aside for this purpose, but for a business that requires equipment or a rental space, this can be much higher. Coming up with the capital to start a business may be the first challenge that an entrepreneur will face.Now, more than at any other time in history, the chances of a small business succeeding are a lot better, thanks in part to the availability of business lines of credit. Small business loans are among the more popular ways to get a new idea off the ground. Unfortunately, there are many myths out there about business lines of credit that often stop people from going this route – and they miss out on bringing their dreams to reality as a result.
BUSTING THE TOP 10 MYTHS ABOUT BUSINESS LINES OF CREDIT
This time, we are eliminating the top 10 myths around small business lines of credit, so you don’t walk away from the best opportunity to start and grow a business of your own.
Myth #1 – My bank is the best place to get a small business loan.
Where did this come from? This is a myth that comes from old-fashioned ideas about who controls money in society. Banks have been traditionally seen as the holder of all money, therefore all businesses owners fall victim to this loan at some point.
It’s not true at all. The reality is that there is an estimated $1.3 trillion out there circulating in the market. There are other organizations that are happy to lend money to small businesses.
Myth #2 – A solo-preneur cannot get business financing.
Where did this come from? This is a negative myth that has discouraged plenty of entrepreneurs. Why bother if you cannot get the money, right? Wrong.
Anyone can obtain a small business line of credit. Around two-thirds of businesses are made up of individuals who work for themselves. New programs and funding options have emerged to meet this market.
Myth #3 – You can use personal financing as business credit.
Where did this come from? Years ago, it was considered frugal to save up one’s income before starting a business, and this is still a smart thing to do now. But the myth has to do with how to use personal financing.
To establish good business practices, it’s critical to separate personal income from business income – otherwise you are putting your own finances at risk.
Myth #4 – The Small Business Administration gives out grants only.
Where did this come from? You may have heard a lot of things about organizations like the Small Business Administration and other networks that provide support to the small business sector. But, you must know that you cannot get a grant from the SBA.
They do have programs to prepare you to request money from the US government for starting a small business, but they have strict guidelines. You can get a small business line of credit from United Capital Source a lot faster and without all the hassle.
Myth #5 – You must have perfect credit to get a business line of credit.
Where did this come from? Having a credit score below 650 can cause anyone to worry about being eligible for a small business loan.
However, even with bankruptcies and other credit problems in the past, an individual may be eligible for a line of credit to start or grow a business. There are many programs designed to help rebuild credit too.
Myth #6 – Once the business gets off the ground, I won’t need a small business loan.
Where did this come from? We all dream of a day when the money will come rolling in and our business becomes successful. But, did you know that on average it takes up to three years before a small business realizes a profit?
Sounds like any business can use a cash infusion after it launches, even if just to have some extra funds to expand it or hire some great employees.
Myth #7 – Alternative lending sources charge too much interest.
Where did this come from? This is a myth that has come out of investigations into predatory lending practices, something that happened to unfortunate individuals back in the early part of this decade.
You are far better off taking a small business line of credit with an interest rate in the high teens and paying down all those other loan and debts that have 25-29 percent interests attached to them.
Myth #8 – If you ask for less money, you’ll probably get it.
Where did this come from? Many small business owners suffer from negative ideas around money. They may also devalue their own worth. Therefore, it may seem safer to ask for less and hope for more.
Instead, work with a lending firm that will provide the capital you ask for and need to be strategic with your business. Don’t settle for anything less.
Myth #9 – I don’t need a business line of credit because I have credit accounts with vendors.
Where did this come from? Years ago, an indicator of a successful business was the other businesses and vendors it was established with. A certain brand credit card, for example, meant the business was doing well.
While it can seem wonderful to have relationships with business vendors, including credit, how much is the business spending to maintain these types of accounts? There could be other ways to save money on the things the business needs.
Myth #10 – It’s better to borrow money from family and friends.
Where did this come from? Unless you have a rich old uncle that names you in his will, very few people are lucky enough to have a family that’s wealthy. Time and taxes have stripped many former well-to-do families down to just living above their means, and nearly everyone is living in debt today. Besides, borrowing money from family and friends is a risky proposition, especially if you cannot pay them back. More people are willing to sue each other in court now, even close blood relatives.
Instead of destroying relationships with friends and family, take responsibility for the success of the business and seek a small business line of credit with an outside source. It’s much less worrisome, and there are generally flexible repayment terms available if you hit a rough patch in the business.