Article from Heritage Bank of Nevada's Business News ()
January 16, 2019
Myths About Small-Business Debt
Donít assume everything you hear is true

Regardless of how well-established your small business is, eventually it will need a helping hand. From just getting the doors open to making major repairs or expanding operations, expenses do arise, and business loans can give you the cash you need to keep moving forward. Before you consider the types of small-business debt, make sure that you arenít listening to outdated myths that could put you at a disadvantage.

Myth: Try to find investors first

When youíre looking for funds for your small business, youíll find articles all over the internet that advocate finding an angel investor or other similar way to get money without going into debt. While those options might be viable for you, they also often come with strings attached.

Rebecca Lake of Intuit QuickBooks points out that investors of any type want a piece of your business in exchange for their help. Depending on the terms of the contribution, they could take a chunk of the profits you make as part of their ownership share. Many of them expect to be active in your businessís operations, so you could lose some control over key decisions.

On the other hand, a loan from a lending institution requires you to pay back what you owe with interest. Thatís a simple financial transaction, though, rather than a piece of what youíve worked hard to build.

Myth: Loans are for struggling businesses

Your circle of friends or industry connections might tell you that only businesses in trouble should go into debt. However, you certainly can consider applying for a small-business loan if your enterprise is doing well. Business consultant Mike Plotnick writes in an article for Staples that a small-business loan might be a good idea youíre looking to take your company to the next level. The extra boost of capital can help you purchase additional inventory or open a new location to keep up with economic trends instead of waiting for your savings to catch up.

Myth: A computer decides your fate

In this digital age, itís easy to assume that an algorithm determines all major lending decisions. While data from computers and credit scores play a part in the loan approval process, the staff of Entrepreneur reports that loans still have a human touch. Loan officers consider subjective details about you and your company, such as your business and marketing plan, when making their final decisions. If youíre worried about a low or short business credit score, make sure that you bring documents that show what the loan is for and your plans to repay it with you to your meeting.

If youíre still unsure what is right for you, stop listening to the rumor mill and seek out a professional business or financial advisor. Theyíll separate myths from the truth and help you succeed.

Published by Heritage Bank of Nevada
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