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Various stages in a business need additional capital requirements. While business revenue may be enough to cover short- or long-term expenses, business owners require more money to fund growth or expansion projects. In such cases, business owners may consider applying for a business loan.

Business loans are considered a viable option for most business needs. But a few misconceptions can make entrepreneurs indecisive about taking a business loan. Such misconceptions are explained and cleared in this post.

About Business Loans

A business loan is a credit facility for businesspersons that they can use to bear business expenditures until they receive funds from other sources. Renowned financial institutions and non-banking financial companies (NBFCs) provide different loans at attractive interest rates and flexible repayment tenures.

Common Misconceptions Associated With Business Loans

1. Misconception – Business Loan Processing is time-consuming.

Digital lending has reduced the time consumed in loan processing. Different lenders have different processes for sanctioning a business loan. Leading lenders have simplified and fastened their business loan processes. Business owners can make an online loan application with handy documents within a few minutes. Post submission, the documents are verified through a quick and systemised process. Once verified and approved, the loan amount gets transferred to the applicant’s account.

2. Misconception – No Business Loan is Sanctioned with Low Credit Score.

A common misconception about business loans is that there is a need for a strong credit history with a high credit score to meet eligibility for a business loan. A high credit score increases the chances of loan approval at attractive interest rates. But a low credit score doesn’t devastate the loan opportunity. A credit score is a primary factor determining the applicant’s credibility to repay the loan timely and offer interest rates. Lenders analyse the credit history of the business and the entrepreneur to determine the creditworthiness. A low credit score can increase the loan interest rate.

3. Misconception – Business Loans are only for Large Sum Requirements.

This myth about business loans misleads many. Lending institutions offer large loan amounts within a range. Businesspersons can apply for a loan amount as per their financial needs.

4. Misconception – Providing Collateral to Avail of a Business Loan is Necessary.

One of the common myths, especially among small business owners, is that pledging an asset is necessary to get approve for a business loan. It makes business owners think twice before submitting a loan application. However, reputed lending institutions like Fullerton India offer unsecured Business Loans of up to Rs 50 lakhs with collateral.

5. Misconception – Business Loans are Restrict to the End-use of Funds

Many businesspersons do not prefer business loans as they feel they serve only a specific purpose or have usage restrictions. However, a business loan can meet numerous financial objectives and is offere without any restriction on the end-use of funds. Even successful businesses take business loans for varied purposes, like investment in advanced equipment or technology, launching a new product or service etc.

6. Misconception – All business loans are the same.

Businesses may have different financial requirements at different stages. To meet these varied requirements, lending institutions offer different business loans. It can be a merchant cash advance, Business Loan for Startups, Small & Medium enterprises/Micro, Small & Medium Enterprises (SME/MSME) Loan, Business Loan for Women, Business Loan for professionals like doctors, chartered accountants, manufacturers, Business Loan for shops, Working Capital Loan, etc. Each loan comes with its benefits and purposes.

7. Misconception – It is Challenging to Meet the Eligibility Criteria for a Business Loan.

Different types of business loans provide financial assistance for different types of businesses. The eligibility for one business loan differs from the other. Eligibility parameters for a business loan for startups may be different from a business loan for an MSME. Lending institutions understand the importance of timely funds. So, they provide an adequate amount of money against easy eligibility.


A business loan is a popular form of credit available for small, medium and large business owners. They can utilise funds as per their business requirement, whether it’s about paying salaries or wages, investing in machinery, clearing bills or rent, or long-term expansion perspective with a new office or outlet.

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