About 20% of all small businesses fail within their first year. Lack of an addressable market, weak advertising, and poor differentiation all play a role in small business failures. But one of the most pervasive reasons is even more obvious: lack of sufficient capital.

Research by CBInsights found that lack of capital is responsible for 29% of all small business failures.

Small business financing can help you tackle day-to-day expenses and capitalize on growth opportunities. It can also mean the difference between outpacing the competition or shutting down.

All too often, small businesses are excluded from financing opportunities. This is partly because certain lenders, such as banks, maintain tight requirements. The latest figures suggest that the small business loan approval rates at big banks stand at a mere 13.6%.

However, there’s another culprit to blame. When it comes to small business financing, it’s easy for misinformation to catch on. Many small business owners are hesitant to take on debt – as it’s largely considered something to be avoided.

Which is why we’re debunking the most common myths about small business debt to help you make the right decision for your business.

Myth 1: Debt is a sign your business is in trouble

It’s tempting to see small business debt as a bailout or a lifeline. Some believe debt should only be called on as a last resort or that it’s an indicator your business is on shaky grounds. But that’s simply not true.

There are many successful, high revenue-generating businesses that choose to take on debt for a number of different reasons. Simply put, debt can be good for your business.

Taking out a business loan frees up capital to be put towards various goals. Entrepreneurs often raise funds when they’re first launching their business. But debt can also help you expand your existing business.

Debt can give you the means to invest in marketing, hire talent, rent a larger space, purchase more inventory, and even research and develop new ideas.

Some businesses also use debt to balance out periodic cash flow disruptions. This is an especially common practice for seasonal businesses or firms with many outstanding invoices. In this way, debt can be used to manage short-term expenses until your capital situation improves.

So long as you have a set goal in mind when taking out business debt, it’s entirely possible to use it to further your goals.

Myth 2: Obtaining a small business loan is a long and difficult process

Maybe you’re hesitant to take out a business loan because you’ve heard about the painstakingly lengthy process. After all, why should you even bother with the application if you need funds now, but they won’t come in for several weeks?

The good news is that nowadays, you have so many more options for fast business financing. Technological innovations have largely sped up a once antiquated system. Plus, online application forms, digital portals, automated verification systems, and more have helped decrease wait times.

Online lenders have been known to have 24-hour turnaround times – from start to finish. However, traditional banks still take significantly longer. But you can help expedite the process by preparing your required documents ahead of time and ensuring there are no mistakes on any of your forms.

Myth 3: Businesses Can Only Borrow From a Bank

The days when a bank was your only option for small business financing are long gone. In recent years, the landscape for small business lending has become ever more competitive.

The rise of alternative lenders – including online lenders, marketplace lenders, and crowdfunding platforms – has made borrowing increasingly flexible. Oftentimes, these options have faster processing times, higher approval ratings, and a wider range of lending products than traditional banks.

Many of the same qualifications still matter – especially your credit score, business history, and revenue levels. However, alternative lenders are oftentimes a lot more lenient than traditional banks. And in the case of crowdfunding campaigns, you may be able to raise funds on just a business idea.

Myth 4: Online Lenders Aren’t Trustworthy

Online lenders haven’t been around as long as banks. Having come onto the scene in the 1990s, many borrowers were at first hesitant to work with the latest players. Fast forward to modern-day, and online lenders constitute an increasingly popular alternative to traditional financial institutions.

In 2019, 32% of all small business applicants turned to online lenders. Online lenders were also critical in helping fill the gap left by big banks during the Covid-19 pandemic.

Not only are online lenders regulated and trustworthy, but they also help diversify the business financing market – providing more lending options for small businesses.

Online lenders are also often times easier to work with than traditional banks. Their application processing times are faster and they’re more willing to consider businesses with varying credit scores, histories, and more.

While you shouldn’t discount online lenders entirely, you should do your research to understand and compare their rates, fees, repayment terms, and policies with other options.

Use business debt to your advantage

Business debt doesn’t have to be a bad thing. In many cases, it can actually work to your advantage. So long as you take the time to consider your decision and goals carefully.

Once you pinpoint exactly how you can use the additional capital and how it relates to your overall goals, it’s time to consider how much business debt you can afford. Make sure to weigh your current expenses against your revenue levels to help you understand this amount.

And if you’re looking for an easy way to compare different business loan offers, make sure to use National. National is the leading business financing marketplace that automatically connects you with personalized offers from over 75 different lenders.

Fill out the 60-second online application to learn more about the financing options you could qualify for.