A confident way to manage loan debt can confirm a long and healthy life for your small business. The right type of financing can come from many sources, and one of these sources is personal business loan. When considering financing your business, what type of loan program should you go for?
Business loans will let you use your business’ financial reputation, including credit and cash flow history, to get approval. These loans often contain stringent terms regarding how you want to use the cash, and you will probably be asked to provide some sort of collateral to back the loan amount.
In contrast, personal loans are given to the individual. Your lender will examine your credit and personal income, instead of your business. Usually, personal loans allow more flexibility in how you use the funds, and lots of lenders do not require any collateral.
When a personal loan is your best funding option? When is it better to wait for an excellent small business loan? Do not forget these situations to learn if a personal business loan is the right funding option for your small business.
Benefits of Personal Business Loans
You have the flexibility to choose to put the funds in your business marketing, office supplies and product development. This is particularly appropriate in case you are running a sole proprietary business; you can divide the funds between personal and business use to cover any shortages in your daily expenses.
Personal business loans come with low APRs as compared to credit cards, helping you to save cash over the life of loan. It will also provide you a fixed repayment time, and you need to pay the loan amount over a certain period of time, help you avoiding the risk of high interest rates.
Ease of Qualification
New to personal business loans? You can simply apply for them and get the approval in just one day. You can get funding from $10,000 to $100,000 depending on the financial conditions and loan requirements. The interest rates are usually between 5.99% and 36%. The average term on personal business loan is 3-5 years. However, these loans are underwritten based on your credit score and your income.
When to Consider a Personal Business Loan
Securing a loan from traditional source can prove challenging for small business owners just starting out. In a recent study, only 34% of small businesses get funding via their bank or credit union as compared to almost 75% of larger businesses. If you find yourself in any of the subsequent situations, a personal loan for business is probably the best fit for you.
If You Just Starting Out Your Business
Your small business’ ability to speak for itself is an essential factor in securing a business loan. A comprehensive business plan, reliable cash flow, and a visibly flourishing facility all improve your chances of approval. A new business owner can also experience some troubles. If you are still in the early phase of getting your small business start functioning, consider applying for a personal business loan.
If You Are Looking For Smaller Amount
There are many banks out there that are willing to provide small loans, which yield less interest for the bank while costing the same amount of work as a larger, more productive loan. If your required loan amount is less than $25,000, you may likely be out of range for a conventional term loan. The SBA guarantees the loan amounts with the minimum of $5,000, but stringent approval standards and if you have less-than-excellent credit, it can preserve you from qualifying for a loan. If the amount you’d need to borrow is small, you can go for a personal business loan for getting almost 99% approval and that too at lower interest rates.
If You Don’t Have Collateral
After cash flow, inadequate collateral is the most common thing small businesses are denied loans, According to the abovementioned research. Generally, online lenders or SBA lenders will not reject you a business loan if inadequate collateral is the only element holding you from getting funding; however traditional funding sources, such as banks and credit unions are not so lenient.
There are many personal business loans lenders that do not ask you to provide collateral for funding. If your financial savings or investments are looking thin, and if providing your home or other things as collateral is inappropriate, you may consider a personal business loan.
When to Go For a Business Loan
Personal business loans can prove a strong choice for small business owners with some sort of specific limitations and concerns. However, if you have good credit, collateral, as well as strong business plan, you may also consider some other types of funding.
What to go for an SBA loan or a Personal Loan?
An SBA loan can offer you lower rates, generous terms, and even more flexibility in applying for funding than you’ll find with other type of business loans. In case you have the right background to qualify for an SBA loan, in addition to the patience for SBA’s long drawn out paperwork and longer approval time, an SBA loan can be your best funding option. However, normally small business owners need cash immediately and the quickest option for funding is online personal business loans.
If You Can Repay Quickly
Excessive interest rates can scare small business owners away from borrowing through traditional funding sources. However, if you’re confident about your ability to pay back quickly, a personal business loan may be the solution that you are looking for. These loans are also an excellent option if you’re borrowing to cover seasonal costs. You’ll be able to comply with a higher interest rate with the information that you’ll be paid up and debt-free quickly.