We use personal loans for all kinds of personal needs, but did you know you can use them to support your business, as well? That’s right, if you’re looking to start a business and are in need of financing, a personal loan can be the solution you were looking for.
How much can you get?
Starting a business isn’t cheap, so the amount may be a concern – does a personal loan offer enough money for you to be able to financially sustain a new business venture? Of course, that will depend on what kind of business you are looking to set up and what capital you need, but you should know that a personal loan will grant you anywhere between £1,000 and £25,000, depending on your personal financial situation and what kind of security you can offer the lender.
What do you need?
In order to apply – and get approved – for a loan of this type, you need to fulfil some basic requirements, such as being over 18 years of age, living in the UK, etc. But the most important aspect is your credit score, if it’s an unsecured personal loan. Your credit score will dictate whether or not you are approved for a loan and if so, how much money you can actually get.
Remember that even if you have a perfect score, you are not guaranteed to get the best deal, so do not plan on walking out with the maximum amount. Gauge your expectations accordingly.
Where do I get one?
If you’re actively looking for a loan, you can either apply in person, on the high street or at a traditional institution like a bank, or you can do it the easy way and look for loans and lenders online.
Applying online is the quickest and easiest way to do it, as you simply need to fill out a basic form and you are likely to find out whether or not you are approved right on the spot. That takes a lot of guesswork out of the process, and saves you a lot of time that would normally be wasted. In business, time is money, so this should be a valuable feature for you.
Is a personal loan better than a business loan?
Ok, but you may be wondering why one would consider a personal loan for a business, when there are business loans available, which are meant for this exact purpose? Surely this is over-complicating things? Are personal loans better than business loans? Let’s take a look at some pros and cons of each.
- You can pay back the loan in regular instalments, so it is more affordable. Especially for a fledgling business, it’s important to keep things as affordable as possible.
- Even if you end up defaulting on the loan or repaying inconsistently, the business won’t be affected.
- You can access an unsecured personal loan relatively quickly and easily, as there are numerous lenders available online and on the high street.
- You are personally financially responsible for this loan and any fall-out that comes from it, such as defaulting, etc.
- If the business is unable to pay back the loan consistently or ends up defaulting on the loan, it will severely impact your personal credit score.
- The interest rate can be quite high on unsecured personal loans, which can bring the total repayment amount even at twice the sum you initially borrowed.
- A start-up business loan will grant you more or less the same amount of money as a personal loan would, at minimum, so there is nothing to lose in terms of amounts.
- The APR is oftentimes lower on business loans than on personal loans. Depending on the lender, you can get an APR around 6%, fixed, so you won’t have unpleasant surprises further down the line.
- A repayment term of 1 to 5 years is available, so you can repay at your own pace.
- Some business loans still require a personal guarantee, so you are still personally involved, just like with a personal loan.
- A lot of business loans have limits and requirements as to how long the company has been in operation for. They ask for a minimum of 6 month, 2 years, etc.
- Certain loan options will only be available to businesses that have a minimum turnover over a certain amount; for example, £75,000.
In conclusion, yes, it is entirely possible to use a personal loan in order to help start a business. Financing a new business venture can be one of the most difficult parts of the entire process, so when several options are available, you must take advantage of every opportunity. Whether or not getting a personal loan is a better idea than getting a business loan is up to you to decide.