Business loans are a popular form of borrowing money and offering solutions to businesses with cash flow problems. Unsecured business loans are easily borrowed and can be repaid when the cash flow is available.
The hard truth these days is that the UK business loan industry is not in its best shape. The image of the industry has been tarnished for several years now because of the unfair practices being taken in the industry.
Many businesses focus on their goal in an ethical way. But many businesses go wrong and create a bad impression in the market. Similarly, they do not repay and act smart with the lender if they borrow money.
The business loans industry
Many businesses require money at some point or the other. Usually, they take borrowing as a last resort. It should not be the case. Borrowing money can be really helpful for the business in the long run. If paid back properly, it can help the business to increase its credit score.
Many lenders offer unsecured business loans with no personal guarantee. In the UK, these business loans benefit them in every way. You can also opt for them and save your business finances.
Decoding misconceptions about the industry
There are many wrong notions about business loans in the industry. It is crucial to eliminate them. Read out the following misconceptions.
It’s all an unfair practice
The negative reputation business loans have earned nowadays is not entirely true. It should not be believed entirely. It is more so because of the negative publicity about the unfair lending practices.
However, these loans aim to help borrowers with small amounts of money for a shorter period. The lenders are often not interested in giving, and hence the bad word spreads in the market.
By believing in these myths, we fail to understand the fact that these are small and short-term loans. These loans have been designed for cases where unexpected expenses occur.
Hence there is nothing wrong with availing of these loans as long as you carry the responsibility and can handle them. It is beneficial if a business makes sure and takes the responsibility of paying it back on time.
They are traps to rip off businesses
The negative publicity around the business loans has led people to believe that these are ways of ploys to take advantage of a business that needs cash. This is far from the truth.
Business loans are one of the best options in the short-term loans category. It helps in settling emergency cash crunches and needs. Provided you intend to meet the repayment obligations, you are good to avail these loan options.
Just be aware that, like any other short-term loans, business loans also become expensive if the repayment is missed or delayed than what has been agreed. The business may have to give away its hard-earned assets in such cases.
Only lenders take benefit from business loans
This is another misconception about business loans: lenders are the only ones who benefit or profit from these loans. On the contrary, the borrower is the one who actually benefits from such loans as it is easy to get whenever required on easy terms.
These loans do not have a waiting period like other traditional loan options and do not require any collateral or credit background check.
The loan features favour the borrower, whereas lenders only benefit from the interest the borrower is paying. It is lower if the borrower is paying on time or in advance.
There are hidden fees and conditions
It is one of the common misconceptions that lenders attach hidden fees and terms & conditions to business loans. This isn’t the case. It is because most people do not go through the terms and requirements while taking the loan. Hence they tend to believe that misconceptions are running around the industry.
The UK business industry is very much regulated where lenders have to disclose the terms and conditions and fee structures beforehand. Hence, it is impossible for lenders to add any extra fee for a hidden fee or conditions once the loan has been taken.
Business loans are for grave financial problems
People tend to believe that business loans should only be taken when you are in grave financial problems or financially broke.
As discussed above also, business loans are a means to provide help in emergency cash crunch situations.
Hence taking a business loan does not mean that it is for some financial crisis. It can mean expansion too. It can also mean buying equipment or paying off the business bills.
If you are taking a loan, it would just mean that you do not have access to your money at that point in time. You need some cash help and borrow from a professional lender rather than a friend or family.
In fact, statistics also indicate that most of the business loans are taken by established or developing businesses.
Loan customers are forced to collections
Some of the business loan lenders are guilty and infamous for using aggressive marketing tactics to take out money from the borrowers. However, they generally do not use threats to collect dues.
In fact, the reputed business lenders in the industry are lawful. They follow professional means to collect the dues.
Still, if the business is feeling or facing any forced or coerced ways of collection, it can file a complaint against the lender with the right authority.
Conclusion
If you can let go of the misconceptions about business loans, you can benefit immensely from them.
These loans are considered one of the best when the business needs external funding sources. It is only believed when these business loans are taken, used and repaid on time.
Do not get lost in the myth world. Instead, focus on reality and try to sort your finances in a simple way.