Entrepreneurs and those looking to start their own business have likely heard many different statements and ‘rules’ about the financial side of things. While some of it may be helpful, many other details are more myth than fact.
It’s essential to understand what is accurate and a myth, as this misinformation can discourage new business owners from ever giving it a shot. Here are a few of the most common finance myths for small businesses.
Myth: Entrepreneurs Have to Use Banks
Commonly, people believe that they have to go to a bank for finance options when starting a business. While a bank will always be an option, it is far from the only option available. Credit unions and alternative lenders are also willing to provide loans (following an application process).
Before deciding on finances, be sure to research all of your options. There are many less common or traditional options these days, including crowdfunding, angel investors, and so much more.
Myth: Perfect Credit Scores Are Required
Credit scores play a significant role in finances and loans – there’s no denying this. However, many people overestimate the value or weight that a credit score may carry. Having a good credit score will make the process easier, but imperfect (or nonexistent) credit isn’t the deal-breaker that many seem to think it is.
There are a few options for dealing with a bad credit score. For starters, one could choose to work on their credit score. This takes time, energy, and work, but it is something that can be done. Alternatively, one can approach other lenders or financing opportunities (while ideally simultaneously working on their credit score).
Myth: Small Business Equals Small Loan
While it is true that many small businesses can be started on a minimal budget, it isn’t a requirement. Yet many people believe that small businesses can only ever access a smaller loan – meaning that they start with less.
When applying for any loan, remember that you’ll likely only ever get an amount you can conceivably pay back. In other words, a bank will only approve the amount they believe you can afford. When providing the paperwork on a loan application, include any proof that may help back up your finances.