Had a great idea for a new business? That is awesome! Now the hard part, is funding. Funding a new business venture is no easy feat, and it can be really difficult if you do not have strong revenues and some business experience under your belt.
Most business loans can be short-term, however, you could consider CreditNinja personal loans.
However, do not jump the gun just yet, there are a few things you will want to know about getting a personal loan before you try. Personal loans are one of the best and easiest loans to get, and they are versatile.
However, they are still loans, and you need to ensure you meet the criteria needed and that you are not taking such a heavy risk that you could end up shooting yourself in the foot.
So, can you use a personal loan to start a new business venture? Let’s look into it in detail.
Is It Possible To Use A Personal Loan To Start A Business?
Personal loans are one of the most versatile forms of credit that you can get. There may be a few lenders out there who will restrict what you can use your credit for, but a majority of them do not include things like businesses on the list of exclusions.
Lenders will often state on their sites if they will allow borrowers to use funds from loans to start a business. If you can’t get hold of this information then it is best that you look carefully through the agreements and be honest on your application.
If you are still not certain that a particular lender allows this, then let them know your intentions and ask if this is okay and compliant with their Ts and Cs. You should always ask as repercussions can be harsh.
If you were to borrow from a lender that prohibits personal loan use for business then it could accrue immediate debt repayment if you went against the rules of the lender.
How Much Can You Get With A Personal Loan To Start A Business?
What Are The Benefits?
Personal loans can be a brilliant way to get some funding, however, it’s not all sunshine and rainbows.
Therefore, you should consider knowing what the pros and cons are. Luckily we already have them here for you.
- Personal loans tend to be on the less expensive side. The average personal loan for 2 years has an interest rate of 9.65%. Although, it does depend on your credit report as well.
- Most personal loans do not require any form of collateral. Most business loans will need you to put up collateral, but personal loans don’t. So, if things go sour you do not need to worry about losing a major aspect of your personal belongings.
- Personal loans come through quickly. In a majority of cases, you can get a personal loan funded in a few days from getting approved. Some business loans can take weeks!
- Having a personal loan on your report does not build a business credit history. If you want to build credit for a potential business loan in the future, a business credit card is a better option.
- Personal loans will often have a shorter repayment term than a business loan does. This type of loan will usually max out at around 5 or 7 years on the terms of repayment. Some can be shorter than this. This means that depending on how much you intend on borrowing monthly payments could be exceptionally high.
- Some personal loans will charge upfront fees as well. Some companies that offer personal loans will charge you an origination fee which will be taken out of your disbursement. It does depend on the lender, but this fee can be up to 8% of the loan in some cases.
What Are Your Other Options?
Personal loans are not your only option however, there are plenty of other avenues you can go down to get the funding that you need.
Depending on your own goals and your situation you may have other routes to funding your business.
Here are a few of your alternative options:
- You could get a business credit card. These offer lines of revolving credit that you can use on repeat. Some can also have a 0% APR introductory rate as part of a promotion. This can give you the time to pay off your startup costs without any interest holding you back.
There can be other perks to this, as you may be able to earn rewards, and it will be great for your business. That being said, interest rates on these cards can shoot up to 20%, depending on how your credit is.
This means that you can start off on the 0% APR, but then, if you don’t pay off the costs in time, you will end up with an interest rate of 20% after the introductory period is over.
- You could also consider an SBA microloan. This is a program that can offer you a loan of up to $50,000. This is designed for start-up businesses and the ability to expand. Lenders will set their own criteria for eligibility though, so you may end up needing to meet requirements for revenues to be approved.
- Not-for-profit microloans are another option. These microlending platforms can offer small loans with 0% to low-interest rates. You will need people in your community to fund a small amount of the loan, however. Not only this but it really depends on how much funding you need. If you need a large amount, this may not be ideal for you.
- Finally, let’s not forget crowdfunding. Crowdfunding can be a great way to get the initial funding for your product. You just need to remember that you want to give your funders initiative. This can usually be done by giving them early access to your product, or other perks.