Marketing
Do Personal Loans Fit the Business?
Business loans are considered to be the best fit when it comes to funding a business. Nevertheless, nowadays financial experts tend to dispel stereotypes built around the business loans and suppose that applying for payday loans or personal loans makes sense too. Some people are cautious about the relevance of the personal loans in this case. Therefore, in today’s article, we decided to consider this topical issue. So, does applying for personal loans for the business make sense?
Firstly, it’s important to clarify the specific difference between business and personal loans. Business loans are supposed to satisfy the business purposes. Lenders provide borrowers with business loans to cover financial issues and help them to grow. A business loan can act as extra funds, which are dedicated to emergency cases.
Since 2008, when a crisis swallowed dozens of enterprises and corporations and banks suffered substantial losses, lenders are cautious about approving applicants for business loans. Banks tend to ignore good credit histories and revenues of the small business owners and started offering strict and unprofitable terms. It doesn’t mean that getting a business loan is impossible – it means that getting approval for the loan will indeed take a time. It may take several weeks to get a reply from a bank. The economic situation is now quite stable in comparison to the previous years. Nevertheless, the shadow of the crisis still chases the banks and financial bureaus. Therefore, the lenders require substantial proof of your creditworthiness and the guarantee that you will be able to pay off the debt.
Unlike the business loans, the personal credit is conscript to satisfy your personal needs (wedding, treatment, education, vacation, whatever.). The essential peculiarities of the personal loans lie in the absence of collateral, small amounts of funds, and emphasizing on the personal issues rather than on business. In fact, personal loans don’t cover business issues. The terms of the personal loans are more flexible rather than the conditions of business borrowing. Therefore, if your credit history allows you to apply for a personal loan even for the business use, it’s possible to get the approval. Obviously, the lack or the absolute absence of the business history can play against you. Still, your revenue, the period of your business activity, and spending habits can improve the situation.
Here are 5 cases when applying for personal loans for a business use makes sense:
1) You have just started your business and don’t obtain a convincing business history
2) You don’t fit the requirements of the lenders or the terms of the loan
3) You can’t provide the collateral, which is required for business loans
4) The funds, which you potentially receive, are dedicated to the unusual uses
5) You are involved in the risky or untraditional industry
A substantial advantage of the personal loans lies in flexibility that isn’t typical for business loans. Therefore, lenders, who provide borrowers with personal credits, may close their eyes on some negative issues, which are unacceptable for the terms of the business loans.
When you apply for a personal loan for the business use, ensure you will able to manage two streams of funds – personal and business as mixing them isn’t good for your financial situation.
Don’t get surprised with the closing costs, which are natural for the personal loans. Some personal credits contain a closing fee, so if you apply for $3000, you will receive $2700 but pay off $3000 including $300 closing fee. It’s a normal situation but don’t let it confuse you.
Young businessmen will only take advantages from the personal loans. Therefore, don’t be cautious about this type of a loan and trust the reliable opinion of the financial experts.
Post je objavljen 05.05.2016. u 16:01 sati.