Starting and growing a business requires capital, and for many entrepreneurs in 

Maharashtra, business loans provide the essential financial backing. 

However, despite the availability of business loans from banks, NBFCs, and other financial institutions, there are numerous myths and misconceptions that often discourage small business owners and startups from applying for them. 

These myths can cloud their judgment and prevent them from exploring options that could help them achieve their goals.

In this blog, we’ll debunk some common myths surrounding business loans in Maharashtra, and present the facts to help entrepreneurs make more informed financial decisions.

Myth 1: Business Loans Are Only for Large Enterprises

Fact: Business loans are available for businesses of all sizes, including small and medium enterprises (SMEs). 

While it's true that larger companies may have more access to substantial funding, financial institutions in Maharashtra offer business loans specifically targeted at startups, small businesses, and medium-sized enterprises.

Various lenders provide specialized products such as SME loans, micro-financing, and startup loans to cater to the needs of smaller businesses. 

In fact, the Government of India has launched several schemes like the Mudra Loan under the Pradhan Mantri Mudra Yojana (PMMY) to help micro and small businesses in Maharashtra access capital at competitive rates.

So, whether you run a small retail shop or a new tech startup, there are business loan options available to help you grow.

Myth 2: You Need Perfect Credit to Get a Business Loan

Fact: While a good credit score can help secure better loan terms, it is not the only factor considered by lenders. 

In Maharashtra, most lenders evaluate a business's ability to repay through multiple criteria, including revenue, business stability, cash flow, and financial history.

Many financial institutions, including banks and NBFCs, are now more flexible with their lending criteria, understanding that not all businesses will have an excellent credit score, especially new businesses. 

Some lenders even offer secured business loans, where you can pledge assets like property or inventory as collateral, which could allow you to qualify with a lower credit score.

Additionally, government-backed schemes, such as the Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE), help reduce the risk for lenders, making it easier for small business owners to access loans, even if they have a less-than-perfect credit history.

Myth 3: The Loan Application Process is Complicated and Time-Consuming

Fact: The process of applying for a business loan in Maharashtra has become significantly streamlined in recent years. 

With digital banking and online loan platforms, applying for a business loan has become much quicker and more convenient. 

Many banks and NBFCs now offer paperless applications through their websites or mobile apps, allowing you to apply from the comfort of your home or office.

Once you submit your application, the process of approval can also be faster than expected. 

Some online lenders and banks in Maharashtra provide instant loan approval for business owners who meet the basic eligibility criteria. 

The disbursal of funds can sometimes take as little as 24 to 48 hours, depending on the lender and loan type.

Moreover, lenders now offer guidance throughout the application process, simplifying documentation requirements and helping you submit the necessary documents easily.

Myth 4: Business Loans Have Very High Interest Rates

Fact: Interest rates for business loans in Maharashtra depend on various factors such as your business's creditworthiness, the type of loan, the loan amount, and the repayment tenure. 

While interest rates can range from 10% to 20%, they are not excessively high, especially if you shop around and compare offers from different lenders.

Banks typically offer competitive interest rates, especially for well-established businesses with strong financials, while NBFCs may charge slightly higher rates for businesses with lower credit scores or higher risk. 

However, even then, the rates are often manageable. Additionally, business loan schemes backed by the government or those provided by cooperative banks may offer lower rates to encourage entrepreneurship.

It’s important to factor in the overall cost of the loan, including processing fees, prepayment charges, and any other hidden costs, before making a decision.

Myth 5: You Need to Repay the Entire Loan in a Short Time

Fact: Many business owners in Maharashtra shy away from taking out a loan because they assume they will have to repay it in a short time frame with high monthly installments. 

However, most lenders offer flexible repayment tenures that can range from 12 months to 60 months or even longer, depending on the type of loan and lender.

A longer repayment tenure means smaller monthly payments, making it easier to manage cash flow while growing your business. However, longer tenures also mean you’ll pay more interest over the life of the loan, so it’s important to strike a balance between an affordable EMI and minimizing interest costs.

Some lenders also offer balloon payments, where the majority of the loan is repaid at the end of the term, giving you more flexibility with cash flow in the interim.

Myth 6: You Can Only Use a Business Loan for Specific Purposes

Fact: Unlike loans that are designed for specific purposes, such as home loans or car loans, business loans in Maharashtra are typically unsecured loans, which means you can use them for a wide range of business needs. 

Whether you need funds for expanding operations, purchasing equipment, hiring employees, managing working capital, or marketing your products, a business loan can be used flexibly for almost any purpose that supports the growth of your business.

In addition, some financial institutions offer purpose-specific loans with lower interest rates for businesses in specific sectors like manufacturing, retail, or agriculture. 

But overall, the versatility of business loans allows entrepreneurs to use the funds where they are most needed.

Myth 7: Small Businesses Can't Get Business Loans

Fact: Many small business owners in Maharashtra are under the misconception that lenders only provide loans to larger businesses. 

However, several loan schemes are specifically designed for small businesses. Government initiatives such as Mudra Loans, Stand-Up India, and Make in India offer financial support to small businesses and startups.

Moreover, microfinance institutions (MFIs) and local cooperative banks in Maharashtra are more inclined to lend to small businesses. 

These institutions focus on fostering the growth of local entrepreneurs, making it easier for small business owners to access funding.

Myth 8: You Need Collateral to Get a Business Loan

Fact: Collateral is not always required to secure a business loan. Many financial institutions in Maharashtra offer unsecured business loans, which don’t require you to pledge any assets. 

However, to compensate for the higher risk, unsecured loans may come with slightly higher interest rates than secured loans.

For businesses that have a strong credit profile and stable cash flow, an unsecured loan is often the preferred option. 

If you're just starting out or need a larger loan amount, secured loans where you pledge assets like property or machinery as collateral may offer better interest rates and loan amounts.

Conclusion

There are numerous myths surrounding business loans in Maharashtra that can prevent entrepreneurs from exploring financial options to grow their businesses. 

It’s crucial to differentiate between fact and fiction to make well-informed decisions. 

Business loans, whether from banks, NBFCs, or government schemes, can be an invaluable tool for fueling business expansion, managing cash flow, or investing in new opportunities.