If you’re planning to start a business, you’ll obviously have to face a lot of hurdles. One of the biggest hurdles you’ll have to clear is to get funding for your business. According to a survey conducted by Reserve Bank of New York, 58% of startups that have been in business for two years or less reported challenges getting credit or the money needed to grow quickly.
Small business loans come in many different ways. The most popular lenders in this field are Banks and Credit unions. Small business lenders are also a popular source of funding. However, the main disadvantage with those loans is that the majority of lenders ask for a “personal guarantee” (collateral) so if your business fails, they can collect the money back from your personal assets.
Ways to get business financing
There are a number of ways in which you can get financing for your business. One of the most common ways is by applying for a personal loan for your business.
A personal loan is money borrowed from the bank, and most personal loans do not require any collateral. Hence, they can be used for any purpose, including funding your business. Keep in mind that getting a personal loan won’t be that easy, as you’ll have to meet certain eligibility criteria. But since a lot of fintechs have shown up in the last decade, going the personal route is much easier these days. You can simply apply for personal loan online and you are good to go, eliminating the unnecessary paperwork and documentation.
A personal business loan relies on your credit as an individual, not as a business
Meaning, any missteps will become personal liabilities against your personal credit and assets. In order to qualify for a loan, one should always maintain a good credit score. Online financial institutions have made it very easy to apply for a personal loan online through their websites. Depending on the lender, your application may take just a few minutes to be processed.
One of the major benefits of using a personal loan for a business is Flexibility. Personal loans are given to you as an individual, to use the money in any manner you see fit. You can either use the funds for marketing, sales, office space and so on. You can even use this money to cover up unforeseen expenses in case there are any shortfalls in your day to day life.
Personal loans offer lower payments than credit cards
Another possible advantage of using personal loans is that personal loans tend to come up with lower APRs than credit cards. It will also leave you with a payment that will make sure your loan is paid back as quickly as possible. Ease of qualification is another advantage when you opt for a personal loan. If you’re just starting your current business venture, getting a bank issued business loan will be one of the biggest hurdles you will ever face. Instead, it will be very easy to get a personal loan when compared with business loans.
When you apply for a business loan, lenders will look at a lot of things like your company’s background, the revenue and the time spent in the business along with your credit score. Also if you are a first-time business owner, it will be very hard to get business loans because the small-business lenders will look for someone more experienced in the field. On the other hand, personal is completely dependent on your salary and credit score. Which means you can include your income sources, whether it is a job or any rental properties which you hold.
Conclusion
Although it’s not possible for everyone, using a personal loan to fund your startup is a pretty good idea to help your business grow. In order to get the best deal, you can always compare personal loan providers online by visiting a number of financial institution’s website.