Personal Loans for Business

Venture capital funds get a lot of press, but it’s out of reach for most entrepreneurs. It’s also not necessary. You do need some cash to grease the wheels of commerce and get things started, but you may not need much. In many cases, you can get a personal loan for a business to get things going.

What Is A Personal Loan for Business?

It’s a signature loan where you pledge your personal earning capacity to help fund your dream. We are talking about personal loans based on income only.

They will have no stake in your business, which has its good points. It’s also probably better than using your credit card to do the same thing because the interest will usually be cheaper.

On average, $2500 installment loans will charge less interest than $2500 in credit card charges. If you have a good idea of how much you need to cover some office equipment or similar, a personal loan for business may make more sense than just whipping out your credit card.

Benefits Of Using A Personal Loan For Business:

1. Access to money faster than business credit:

If you’re starting a new business or planning on expanding your current company, you can apply for a personal loan and have the money deposited directly into your bank account before the bank even finishes processing your application. This can be done in just a few short hours and is far faster than applying for business credit and waiting days for approval. There’s also no waiting period either, so if you need some extra cash fast, this is the ideal solution.

2. Minimal interest rates:

Personal loans are not subject to the same strict laws that pertain to business loans, which means less red tape when it comes to interest rates. Because of this, you can negotiate some very beneficial interest rates on your loan.

3. It’s not backed by the company:

Although some personal loans are made on the company’s credit, they are usually secured by the individual borrower. That means that if you apply for a personal loan for $25,000 with an interest rate of 7%, you’re actually applying for $25,000 with an interest rate of 7% regardless of how much money your company has access to. This is beneficial because it allows borrowers to make their payments regardless of payrolls or cash flows (which can be affected by external factors).

4. Liability protection:

Personal loans are made on an individual basis, which means that you aren’t responsible for making payments if your company goes under. If the business fails, the loan is simply written off rather than being passed on to other members of the company, which would be the case with a business-funded loan.

5. Potential tax savings:

With personal loans that are secured by personal property, you may be able to deduct the interest paid from your taxable income. This is something that your accountant should verify before signing on with any particular lender.

Things To Know Before Taking Out A Personal Loan For Business:

1. Be wary of over-advances:

If you’re applying for a personal loan with the intention of using it for business, you should be aware that the lender will likely choose to charge interest on this money no matter what. This is normal and sometimes unavoidable, so you must be prepared for this. Your loan may have a higher interest rate than the standard one offered by banks, which is something that can’t really be helped so long as it’s what the lender wants to do.

2. Be sure that your company has enough credit history to justify the personal loan:

You’ll need to provide your lender with information about who owns or runs your company (and any other relevant details). They’ll use this information to determine if you’re likely to pay back the loan on time or if your business is in poor enough shape that they won’t want to risk it. If the lender doesn’t think that you’re likely to pay back the loan on time, they probably won’t approve it.

3. There is a lot of paperwork required:

Like we said earlier, personal loans are not subject to the same rigorous approval process as business loans are. Because of this, there will be a considerable amount of paperwork involved in your application. You’ll need to provide documentation about your company, as well as references that are also able to vouch for you.

4. Be sure that your company is approved for the personal loan:

Some lenders will only accept applications from businesses that have been pre-approved by them, so be sure that your company is on their approved list before applying. This is particularly important if you have a small business that isn’t yet successful enough to qualify for traditional business lines of credit or bank loans (especially if they’re already on the verge of bankruptcy).

5. No co-signers:

If you’re going to use a personal loan for your business, it’s going to be in your name only. Most lenders don’t allow for another party to guarantee the loan, even if that person is a significant part of your company. You will not be able to add a co-signer to the loan no matter what, so if you’re hoping to use someone else’s credit history in order to get approved for the loan, forget it.

6. Be wary of foreclosures:

There are special laws that apply specifically to personal loans made on a borrower’s own home or property. While foreclosures are legal, they can be complicated and require creditors to act swiftly. If you plan on using your personal property as collateral against the loan, be sure that you understand what this means for you.

Drawbacks Of Using A Personal Loan For Business:

1. Your personal credit is on the line:

As we mentioned earlier, personal loans aren’t guaranteed by your business. If you default on the loan, your credit history will take a hit. This can affect any loans you apply for in the future, so if you have poor credit already, it’s probably best to avoid this option altogether.

2. You can’t use it for everything:

Personal loans are made on an individual basis, so if you’re applying with the intention of using it for your business, you’ll need to consider what exactly that means. Most lenders will only allow you to use the loan for business expenses, so personal uses are typically prohibited.

3. Equity loans are more common:

Most lenders will want to use your home or property as collateral against the personal loan, which means that there is no way to get access to the money until you pay off this loan. It also means that if you default on the loan, your lender would have the right to foreclose on your property and sell it in order to pay itself back. This drastically limits your options when it comes to cash flow and paying employees, or other necessary costs.

4.  Lenders may charge a higher interest rate:

As we’ve already mentioned, personal loan rates are generally higher than what you would be able to expect with your bank or another lender. This means that you’ll have to pay more in interest on top of the amount you’re borrowing, which can be significant depending on how much is being borrowed.

Does My Credit Score Affect My Business Loan?

Credit applications can be tedious and time-consuming, but they’re also important for the success of your business. Your credit score is an indicator of how likely you are to pay back a loan or maintain a positive payment history (which is something lenders look for in order to approve you).

An individual’s credit score is determined by several different factors, which are weighted based on their overall importance to the lender. There are three main categories that make up your credit score: Payment history, amounts owed, and length of credit history. Overall, these three categories make up 35% of your total credit score.

Why Might You Want A Personal Loan for Business?

If you don’t want to be beholden to venture capitalists, who will expect a piece of the business, you might want to self-finance. If you want to start conservatively with a side project until it has legs, you may not qualify for most business loans.

You may want to have control over everything. This may give you the most control of all the options available to you.

You may see a way to fuel growth and see that borrowing makes sense. It may make more sense than bootstrapping, which could strangle an unexpected growth opportunity.

What Do I Need to Apply for a Personal Loan for Business?

A personal loan for business is probably going to be for a bit more money than a payday loan. It might be more in the range of a 1500 dollar loan or larger.

As such, they may want a little more information from you to get started. But, like with any loan, you will need to show you are a legal adult and citizen or legal resident. This is often done by providing a copy of your identification, such as:

• A driver’s license.
• A state-issued ID card.
• A military ID card.
• A tribal ID card.

You will also want to provide proof of income. You may need to provide more than your most recent bank statement if applying for a larger loan.

Apply Now For A Personal Loan for Business at TheGuaranteedLoans

TheGuaranteedLoans can help you find what you need. We keep up-to-date information on hard-to-find direct lenders and their products.

You will out an application with us. When we find a match, we let the lender know and they will get with you to complete the process.

FAQ