Busted! 7 Business Myths Debunked For Your Information
We live in a world where facts aren’t facts any longer. The term “alternative facts” is the tagline of Trump administration. There is a president/ businessman in the White House who openly admits he lies to the American people. How on earth he gets away with it is anyone’s guess, and plenty of experts have given it a try.
When the POTUS is happy to deceive the general public, it sets a bad precedent as the attitude permeates into society. Businesses, then, are screwed because it’s already a dodgy world of misinformation. Take finances as the ultimate example. There are so many lies that it’s hard to tell what is worth listening to and what should be dismissed.
Money advice is vital for an SME. There isn’t enough of it to go around, which means the small amount available needs spending wisely. Accountants are expensive, and that is why entrepreneurs rely on their peers and the internet for help. If you’re one of these men and women, it’s essential to be able to spot the lie when it appears. Thankfully, this time you’ve come to the right online post because 60 Second Marketer has turned the spotlight on myths.
Here’s the advice that may be holding your company back financially.
Struggling Businesses Apply For Loans
The logic here is that only individuals with money problems ask the bank for help when they are broke. Businesses don’t work in the same way for one reason: growth. It’s true that a failing company will run to a lender to ensure the flow of money never stops. Without cash flow, the firm is dead in the water. However, on the flip side, healthy finances are integral for expansion too. And, “healthy” doesn’t mean that there is no debt on the balance sheet. Instead, it says that there is plenty of funding to invest in recruitment, new technology, and corporate real estate.
Are there risks involved? Of course there are as there is no way to tell if the project will work or tank. Still, the quality bosses understand that the potential debt relating to the loan may be small fry. When an expansion is successful, the company is bound to see an increase in lead generation, brand awareness, and sales. As a result, the loan will act as a catalyst for more money, not less.
Borrowing Is Bad
A term this vague is bound to hold a few truths. Sure, borrowing can be bad depending on the circumstances. Usually, this is a reference to profit, but as we have seen this isn’t always the case if you borrow strategically. To take this one step further, business owners have to know when to seize opportunities. Otherwise, they pass you by and may never return, and that’s worse than lending money. People who have been successful in the past opted for short-term loans that are guaranteed to turn a profit. How do they do this? Normally, they see a niche or a gap in the market and apply for funding.
Bad credit is another feature that is synonymous with lending. Having a balance doesn’t automatically mean your rating will take a hit. In fact, it can boost it depending on the scenario. Businesses which pay back the minimum amount while accruing 0% are in a strong position credit-wise. Other than that, it’s crucial that the amount is cleared at the end of the month.
The Small Print Is Dangerous
As a rule, this is a great motto to live by because it raises awareness of the risks. The fine print may have a few extras thrown in there for good measure and you need to be aware of them. Those who aren’t tend to fall foul of the minute details and lose money.
Don’t let this get you down, though. Not every lender is a diabolical genius that wants to trap you with high interest rates. The reality is that it depends on the individual company. Therefore, bosses have to read the contract details thoroughly and pull up anything that looks dodgy. Some of the things to be aware of include set up fees, exit fees, and early repayment fees. Any of these examples or all three can lead to higher premiums at the end of the month.
This is one reason accountants are popular in the industry. Their knowledge and expertise often save businesses a big chunk of money regarding a loan. In conjunction with an attorney, you should have all of the bases covered.
A Bank Is The Only Option
No, it isn’t. In a world where making money is easier than ever before, there are dozens of options on the table. Your local branch may be the simplest and most accessible choice, yet it doesn’t hold a monopoly over the rest. And, the quicker entrepreneurs realize this, the better as it provides leverage.
Imagine going to the bank and talking to the manager and he/she says “this is the best deal. Take it or leave it.” A person that believes this lender is all they have to keep their business open is going to sign on the dotted line. In reality, there are small business credit cards that are available with a range of offers. Chase has a card that has 0% and $0 annual fee, along with 5% cashback on selected categories. Compared to 20% interest at a flat rate, this is a fantastic deal.
Companies on the search for smaller loans should look to their local credit union. Unions are experts in finance under $10,000 and their repayment plans are flexible and varied.
It’s Hard To Obtain Onz
The next time that you hear peers utter this phrase then dismiss it out of hand. Public opinion assumes that banks in particular are less than willing to hand out money. The crash in 2008 tarnished their “stellar” reputation apparently and they are cautious. It’s nonsense. As soon as the dust settled after the Housing Crisis, the organizations were back on the market trying to shift their products. That means they have never stopped lending and don’t plan on doing it anytime soon.
What may have led to this theory is a lack of applications. Believing that a loan was impossible to secure, entrepreneurs have given up filling in the relevant forms. What’s the point if it is going to get rejected regardless? The media has exacerbated the situation, which is why business owners such as you have missed out recently.
One thing worth pointing out is that lenders are less forward than before. As a result of their actions, they are (are being forced to be) more careful than before. So, applying for a loan isn’t a walk in the park. You’ll have to provide thorough details and prove you can pay the money back in the timeframe.
Approval Takes Time
Sometimes this is true, as you would expect with everything at stake. The lender has to be certain that you aren’t a risk. Otherwise, they may as well throw their money down the drain and wave goodbye. Credit checks and reports are the norms in today’s society when anyone applies for funding. But, remember that this the age of technology. Scarily, everything these institutions need to greenlight a loan is available online and is only a click of a button away. When there are no black marks, approval is granted within a matter of minutes.
Have you heard of a pre-approved loan? As the name suggests, this is offered on the basis that you’ll already pass the stringent tests. All that is left is to check credit before releasing the funds into your account.
A word of warning: proceed with caution. Because funding is available at the drop of a hat, it’s to forget about the drawbacks. Only apply for a loan when it’s necessary, i.e., growth, liquidity problems or opportunities.
Last Resort Only
This is probably the worst lie to believe. Anyone who has read the above will see the benefits of taking out a loan. Yes, there are risks and they need addressing beforehand because they can bite you in the ass. But, to say it’s the last resort isn’t realistic. A final option is something such as bankruptcy where filing will impact the firm. For one thing, it may go out of the business. And, for another, it will be hard to secure a loan for the rest of your life.
Funding has lead to situations where entrepreneurs have had to file for chapter 7, 11 or 13. However, it’s usually because they don’t understand the terms of the agreement. Without reading through the fine print and diversifying your options, the inevitable is bound to happen.
A loan is often the only means to get a company off of the ground. Then, it’s typically the only option that can encourage growth and success. As far as last resorts go, these aren’t features that are attributable.
How many of the above did you believe? Have you changed your mind?
