Common Myths About Business Loans & Lines of Credit (And the Truth)

Introduction: Are These Myths Stopping You From Getting the Right Funding?

Many business owners hesitate to apply for funding because of misconceptions about business loans and lines of credit. These myths often lead to missed opportunities, unnecessary stress, or choosing the wrong financing option.

In this article, we’ll debunk the most common myths about business loans and credit lines—so you can make an informed decision about growing your business with confidence.

If you’re still unsure, SCG Funding can help you navigate your options.

Myth #1: You Need a Perfect Credit Score to Get Approved

The Truth: Business loans and credit lines are available for a wide range of credit scores.

Many business owners assume they need an 700+ credit score to qualify for financing. While a higher credit score can improve loan terms, many lenders offer flexible financing options for businesses with less-than-perfect credit.

• Business lines of credit often require a credit score of 600+
• Working capital and equipment financing may be available for scores as low as 500+, depending on revenue and business history

What matters more? Your business revenue, cash flow, and overall financial health. Even with lower credit, you may still qualify for funding.

📌 Related: How to Qualify for Business Financing

Myth #2: Business Loans Are Only for Struggling Companies

The Truth: Successful businesses use financing as a tool for growth.

Some business owners believe that only failing businesses take out loans. In reality, thriving businesses regularly use loans and credit lines to scale, invest, and increase profitability.

How successful businesses use financing:

• Expanding to a new location
• Purchasing equipment to improve efficiency
• Hiring staff to meet growing demand
• Stocking up on inventory ahead of peak seasons

If your business is growing, strategic financing can accelerate that growth without putting unnecessary strain on cash flow.

📌 Related: 6 Reasons Business Owners Need a Loan

Myth #3: Applying for a Loan Takes Months

The Truth: Many business loans and credit lines can be approved in 24-48 hours.

Traditional banks may take weeks or months to process loan applications, but alternative lenders like SCG Funding offer fast approvals with minimal paperwork.

Most businesses can get:

• Pre-approved within hours
• Funded within 24-48 hours for working capital or equipment financing
• Instant access to a business line of credit once approved

📌 Related: How to Get a Small Business Loan in 2025 – Step-by-Step Guide

Myth #4: The Cost of Capital Is Too High to Make Financing Worth It

The Truth: Smart financing can help businesses increase profits despite costs.

While the cost of capital matters, the real question is: Will the loan generate more revenue than it costs?

If a loan allows you to:

• Buy equipment that increases production
• Expand to a new location that doubles revenue
• Purchase inventory that sells at a 3x profit margin

Then the ROI outweighs the cost of financing, making it a smart investment.

Additionally, business lines of credit charge only on what you use, keeping costs low when managed properly.

📌 Related: When to Choose a Business Loan vs. a Line of Credit

Myth #5: You Need Collateral to Get Approved

The Truth: Business loans and credit lines don’t require collateral.

While some traditional loans require collateral, working capital loans, equipment financing, and lines of credit are available with no personal assets at risk.

Approval is often based on:

• Revenue and cash flow
• Credit history
• Time in business

📌 Related: Find Out If You Qualify

Myth #6: A Business Loan Will Hurt My Credit Score

The Truth: Responsible use of financing can improve your credit over time.

A business loan or credit line only hurts your credit if:

• Payments are missed or defaulted
• You max out credit and struggle with repayment

However, if you:

• Make on-time payments
• Keep credit utilization low
• Build a history of responsible borrowing

Then your business credit score and lender relationships improve, helping you qualify for better loan terms in the future.

📌 Related: SCG’s Credit Repair Program

Final Thoughts: Don’t Let Myths Stop You From Growing Your Business

Many business owners miss out on valuable financing opportunities because of common myths. The truth is, business loans and credit lines are tools that can drive growth when used strategically.

If you’re ready to explore real options that fit your business needs, SCG Funding can help.

📌 Apply now: Start Your Application