Do you know everything you need to know about small business financing? Whether you’re a small business veteran or just starting out, obtaining capital is one aspect of entrepreneurship there’s a lot of confusion about.
In fact, it seems getting financing isn’t the only challenge entrepreneurs face. Simply learning about and understanding their financing options is a hurdle in itself for most small business owners. In OnDeck’s latest quarterly Main Street Pulse Report,
*80 percent of small business owners say they don’t think banks do a good job of explaining what it takes to qualify for different types of business financing.
*75 percent of small business owners admit they don’t know all of their financing options.
*66 percent of small business owners say they don’t have a strong understanding of how business credit is calculated and how lenders use it to deny or approve financing applications.
Let me provide a little bit of education by debunking some of the most common business financing misconceptions I hear from small business owners.
1. Myth: The SBA gives business loans.
Reality: The SBA does not make direct loans. They do, however, make guaranteed loans through a variety of financing sources including banks, credit unions and non-bank lenders. The SBA guarantees a portion of the loan to lessen the risk to lenders and make them more likely to lend to small companies.
2. Myth: If the banks turn me down, I’m out of luck.
Reality: Banks are only one financing source that’s open to small businesses. Other lending sources may include community-based microloans, alternative financing methods such as merchant cash advances or factoring, credit unions or crowdfunding. The best option for you depends on a variety of factors, including how much money you need, how long you’ve been in business, your business credit history and how fast you need the money.