Debunking 6 Myths About Start-up Business Loans | Excellent Information for 2019 and Beyond

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If you’re currently working on setting up your start-up business, you’ve surely heard all sorts of myths related to Start-up Business Loans. Some warn you against banks, while others swear they’re the best option for financing. Others tell you that getting a loan will take forever, will require a perfect credit score, or won’t be possible at all.

All of these myths have been circulating for years and have been the source of misinformation for many entrepreneurs who were trying to finance their business venture as easily and as reliably as possible. Let’s debunk the most popular 6 myths about start-up business loans.


You can’t get a start-up business loan from a bankMyth #1: You can’t get a start-up business loan from a bank

There is a common misconception among entrepreneurs that start-up businesses are never accepted for loans from traditional financial institutions, such as banks. Supposedly, it’s too risky and the bank would be gambling on a business that has yet to be established and that cannot deliver. As you’ll be able to see, that’s a lie.

Truth: In fact, you may be surprised to find out that 16% of all financing for companies under two years old comes from banks. And it’s true that the number is not super impressive, but did you know that it’s actually higher than a lot of other alternatives that are often championed as ideal sources of financing for small businesses and start-ups? It’s higher than the percentage of financing provided by friends and family of the entrepreneur, venture capital, government agencies, business angel investors, and even trade creditors.

Banks won’t be the ideal funding option for all businesses, so to determine whether or not they’re right for your company, you have to look at the type of business you’re putting together and the growth you are likely to experience. Steady growth in a business like a coffee shop works great with a bank loan, but accelerated growth from an online business, for example, will require more capital and at a rapid pace, so you’re better off going with an alternative means of financing that suits your needs better.

Myth #2: You need a lot of money to start up a businessMyth #2: You need a lot of money to start up a business

A lot of people don’t even try to get a start-up business loan, because they get so discouraged by the supposedly high amount of money they’re going to need. Getting a business up and running is a massive undertaking, without a doubt, but the amount of money required is typically vastly overstated.

Truth: If you thought that you’d need fabulous amounts of money to start your own business, you’ll be happy to hear that’s only a myth – you can get your business going for as little as $25,000 and in fact, that’s how much it takes the average start-up to start running.

It’s more difficult to work with little money, there is no doubt about that. However, it’s entirely possible, as long as your business plan is solid and you employ some smart tactics along the way, such as renting and borrowing, instead of purchasing, for things like commercial space, vehicles, and equipment. Even hiring based on commission instead of salary can save a lot of money when it counts the most.

Myth #3: Start-up loans are almost impossible to getMyth #3: Start-up loans are almost impossible to get

According to the myths that are going around, it’s not just banks who supposedly won’t hand out loans; none of the other financial institutions will, either. According to some, it’s incredibly difficult to the point of being almost impossible to get a loan as a start-up, because everyone is looking for an established business that’s been in the game for a few years already and has the stats to show for it. That includes business credit and other credentials that start-ups just lack completely. Surely that means that no one will trust a start-up with a loan, right?

Truth: Wrong! Yes, it’s easier when your business is already established, but numerous lenders are starting to offer to finance start-ups, and they don’t require a business credit history. Of course, the flipside of that is that your personal credit score does come into play in a big way. In fact, that’s going to be the main thing they look at and it’s going to factor into the decision-making process.

You also need to be aware of the fact that the rates you will be offered won’t be as good as some other businesses may benefit from, but the important part is that it is definitely possible to get financing. You just need to be prepared and have your documents in order. Proper preparation will ensure your success.

Myth #4: Your credit needs to be perfect to be approved for a start-up business loanMyth #4: Your credit needs to be perfect to be approved for a start-up business loan

For years, companies with bad credit or no credit at all have stayed away from loans, thinking that no one will approve them for a loan because of their rating. And it used to be true – traditionally, banks would only fund businesses that were able to demonstrate fantastic credit, leaving start-ups in a hopeless lurch. However, the belief that things are still like that and that one’s credit score is the only and most important aspect that matters is completely (and thankfully) false.

Truth: Things are changing, and private and alternative lenders are broadening the spectrum of financing for start-ups and small businesses. Credit rating is no longer the only thing being considered when applying for a business loan, as documents such as cash flow statements and revenue history are coming into play and gaining equal importance to a credit score when it comes to approval criteria.

Credit still plays a role, and if possible, it should definitely be improved in order to boost your chances of eligibility. Your financial history doesn’t paint the whole picture of your company, but it does offer a snapshot, so you’d better do your best to make sure it’s a good one.

Myth #5: You won’t get a loan if you ask for a lot of moneyMyth #5: You won’t get a loan if you ask for a lot of money

Some popular wisdom says that the more you ask for, the less you are likely to receive, which can really put a damper on your plans. Especially if you end up needing more than that $25,000 we mentioned, it can be a little daunting – what if you are killing your eligibility? Are you trying to bite off a bigger chunk than you can chew and ending up with nothing? It’s a terrifying prospect, for a business owner.

Truth: While smaller loans used to be more readily available in the past, that is no longer the case; lending offices aren’t as reluctant to approve larger loans anymore, because it turns out that they are more profitable for them, in the long run.

It is understandable why an entrepreneur would be apprehensive to borrow a large sum of money, but taking less money than you actually need makes no sense. Borrowing the amount you need, albeit a larger one, is more likely to work well for you and ensure profitability and growth, thus allowing you the opportunity to pay back your loan with ease. The only thing you need to ensure is that you can afford to make your loan repayments on time.

Myth #6: You have to go to a bank because online lenders are scammersMyth #6: You have to go to a bank because online lenders are scammers

You know how the story goes – you can only trust what you can see and check, so if you don’t meet up with a stern man in a suit who can reject you in person, then the loan isn’t real. The online lender charges you way more than they should, adds hidden charges that aren’t included in the contract, and ends up scamming you, instead of helping you. But is that all true?

Truth: While there certainly are sketchy and predatory companies out there that offer online loans, that certainly doesn’t mean they are all the same. It would be bad business to reject a potential prospect for financing because of preconceived notions or unfounded claims. At the end of the day, you’ve got the same chances of getting scammed whether the company has a physical office you visit or not.

In reality, online lenders can actually offer great opportunities for you, because they are more likely to take on “risky” lenders with imperfect credit scores or a brand new start-up that is just getting off the ground. In addition, you need to thoroughly check and vet any lending institution you do business with, whether it’s online or not, so as long as you make sure the company is legitimate, there is absolutely no reason to avoid an online lender.


The business world is full of myths that can scare off entrepreneurs, especially when it comes to financing. It seems like all Start-up Business Loans come with warnings, caveats, and restrictions, but it’s actually not all that bad. A lot of these common misconceptions can be easily debunked, so whether it’s bank eligibility, loan amounts, or concerns over credit score, chances are that getting a start-up business loan is actually easier than you think.

Financing isn’t the only thing you have to deal with when starting a business online. Be sure to check out my How to Start a Small Business Online post for other important things to consider.

So, what assumptions have you been under when considering financing your start-up business? Do you have any experience with obtaining Startup Business Loans? What questions or concerns do you have regarding Start-up Business Loans? I’d love to hear what you have to say. Please let me know by commenting below.

Thank you,

Scott Hinkle



8 thoughts on “Debunking 6 Myths About Start-up Business Loans | Excellent Information for 2019 and Beyond”

  1. Todd Matthews says:

    Good tips, and it’s also great to know that we don’t need to break the bank in order to get our loans that are required.

    I was one of those who thought that you needed six-figures to put down just to even get approved for a loan, but $25,000 is next to nothing these days. You can also get investors to help you cover the cost, and give them a good ROI in return.

    I think it would give a fantastic peace of mind to would-be business owners that they can get the money and help they need to start a business rather than see their dream falter due to such myths.

    1. Scott Hinkle says:

      Hello there,

           I too was under the assumption of some of these myths.  Particularly I thought my company would have to have a good credit history built up, etc.

      Assumptions and implied impressions can cause people to pass on an opportunity that would otherwise have been beneficial for them.

      Thanks for commenting,


  2. Sondra M says:

    Scott, this should be a very helpful article for people that are thinking about getting a start up loan for their business.  Coming from a CPA background, I will stress that it is best if you can minimize the amount of money that you need to borrow when you start.    

    If you are limited on money, people should consider partnering with someone that has more financial resources but limited time to actually run the business.    

    Also consider choosing a business model that does not require as much money to operate.   For example, an online pet store will be very inexpensive to start if you begin as an affiliate marketer.   Even if you want to sell your own products, an online pet store will require less cash up front than a pet store that is operating in a physical location.   

    That said, I agree that banks do loan money to small businesses for startup.   They will be looking at your business plan’s financial projections very closely.  They will also need to see how you are going to repay your loan.    They will also want to see that you have enough experience to have a chance at being profitable.   

    Great reminders in this article.   

    1. Scott Hinkle says:


           Thank you for these tips.  I totally understand that the less you ask to borrow the more likely you are to be approved simply because the risk to the lender is less.

      I love the idea of partnering with others who have the financial resources but maybe not the time.

      That’s one of the reasons I love affiliate marketing.  There’s really little or even no start-up costs involved, depending on how you go with it.  That’s why I “push” Wealthy Affiliate as much as I do.

      Thank you so much for taking the time to comment and offering additional tips,


  3. Marlo says:

    Your site was super helpful. I believed in all of these myths until I came upon your site.

    I’m really glad I found your site this is going to help me a lot in the future.

    Do you have any tips on the best banks to get a loan from? Or the best ways to go about getting a loan?

    1. Scott Hinkle says:


           Most people have these preconceived notions and just assume they’re true.

      I’m glad this article helped you.

      As for tips, if you look under Myth #1, in the Truth paragraph, you’ll see a link for the word banks.  That will take you to a list of recommended banks.  One of the best tips for actually getting one is having a solid business plan.  In the last paragraph under Myth #2, you’ll see a link for business plans.  Check that out for additional information.

      Thanks for commenting,


  4. Henry says:

    Hi! I realize how unfounded our beliefs sometimes could be. We just get in the habit of listening and repeating stuff that others tell us, and in most cases those statements are pulled out of context or in the best case, just half true.

    One that has greatly surprised me, and I’m happy to hear it’s just a myth is “You have to go to a bank because online lenders are scammers”.

    1. Scott Hinkle says:

      So true, and we tend to add more credibility to it if we hear it from friend or someone else we know.

      Me too.  In some cases you can find better deals going online using lenders that don’t maintain brick and mortar locations, etc.

      Thanks for commenting,


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