Financing the small business is an option that all entrepreneurs have to consider when contemplating growing their businesses.  There are many myths about financing the small business.  These are the top 10 myths.

1. You Need a Perfect Credit Record to Get A Small Business Loan:

You don’t need a perfect credit Record in order to obtain a small business loan.  You just need a good credit record and demonstrate that you can repay the loan.

2.  A Great Business Plan is the Most Important Thing You Need for a Bank Loan:

A great business plan is not the only thing you need in order to get a bank loan.  You have to demonstrate that you can repay the loan by demonstrating that you have a business that is generating revenues.  You have to demonstrate that you have a good team that can continue to execute the business plan and make the business successful so that they can get their money back plus interest.

3.  Every Financing Source Requires Debt or Equity:

Every financing source does not require you to take on debt or give up eqity.  If you’re able to obtain a small business grant, you do not have to take on debt or give up any equity in the business.  You can raise money on Crowdfunding sites (such as Kickstarter, Indie Gogo, etc.) without having to take on debt or give up equity.  Learn more about Crowdfunding.

4.  The Easiest Source to Finance a Small Business is the SBA:

The Small Business Administration (SBA) administers business loans provided by the federal government.  They do so by providing loan guarantees to lending institutions (such as banks) that actually make the loans. 

5.  It Takes A Long Time to Get A Small Business Loan:

It does not take very long to obtain a small business loan from a lending institution.  An SBA backed loan can take up to a week and other lending institutions can give you a response within 24 hours.

6.  If The Bank Won’t Lend No One Else Will:

Being turned down by a bank is not the end of the road.  Other institutions are willing to lend to you if you meet their requirements.  Don’t forget that you can also borrow from friends and family.  You can also use Crowdfunding sources. 

7.  Using Personal Credit Record will not Impact Borrowing:

Using your personal credit record instead of the business record will have an impact on your ability to borrow money from lending institutions such as banks.

8.  Asking for A Small Bank Loan Amount Will Get Turned Down:

If the bank believes that they can make a profit from lending you the money they will lend it regardless of the amount.  However, they may redirect you to a different lending vehicle if you ask for a small amount.  For example, you bank may direct you to apply for a credit card instead, if you’re applying for a $15,000 loan.  It cost banks the same amount to underrite and process a $60,000 loan as it does a $500,000 loan.  Hence, they would prefer to focus their efforts on the bigger loan.

9.  You Can’t Start A Business Without Borrowing Money:

Not True.  You don’t have to borrow money to fund your startup.  Most startups are funded by the founders and not external lending sources.  Founders usually contribute the startup funding to get their projects off the ground.  If there are more than one founders, each contribute their share of the startup funding.

10. Getting A Small Business Loan is Very Difficult:

This use to be a difficult process.  In the past you had to fill out many forms and provide a lot of information about your business and convince a number of people in the lending institution before a decision is made to lend you money.  However, competition in the marketplace from online lending sources has forced banks to reconsider their lending practices and make it more friendly to small businesses.  Today you can fill out a simple application and get a quick (within 24 hours) response from banks and other lending institutions.