If you have started a new business, the first option that comes to your mind is to avail a small business loan. At times, due to poor credit history or history of defaulting the payment, you might have a difficult time securing a business loan. Why not get a personal loan instead, and learn to manage your business credit as highlighted in www.sba.gov/blogs/10-stats-explain-why-business-credit-important-small-business. You will learn all about the importance of maintaining a good business credit.
Personal Loan is probably the last option when you plan to fund your business. This loan is right for you if you do not meet the requirements of the lending bank or you have defaulted in the past. However, bear in mind these points that are applicable to personal loans.
1. Personal vs professional: When you take a personal loan for your business, it is evident that you are mixing your professional values with your personal finances. This might not pose a problem if your business is in the nascent stage, but you must keep track of them and work on your business credit.
2. Additional Costs: If you have applied for a loan of $5,000, there will be a closing fee of $250. This means you will see $4,750 in your bank account. Do not let this take you by surprise as you will be paying interest on the initial amount of $5,000.
Minimum Requirements For Personal Loan:
In order to qualify for a personal loan, there are few criteria that you must satisfy. It includes:
· There should be a minimum credit score of 600
· You must have a high income
· The debt-to-income ratio must be approximately 40 percent.
Terms and Conditions
· APR or annual percentage rate ranges from 5.99 percent to 35.89 percent.
· The loan amount can start from $1000 and go up to $40,000. Choose the right amount according to the needs of your business.
· The duration of the loan ranges from three to five years.
· Once you meet all the requirements, you will receive funds within a week of submission of the loan application.
· 1 percent to 6 percent of the total loan amount is charged as origination fees.
· There are no prepayment fees.
· $7 is charged as processing fee.
· A valid identity proofs
· Bank account statement for the last three months
· Proof of residence, your contact details, and any other documents that the lending bank insists.
Applying For A Personal Loan
To avail a personal loan for your business, you can apply on the lending bank’s official website. There are options to check your credit score online, so you know if you are eligible or not.
If you are a budding entrepreneur, and you fail to meet the requirements of a business loan, there are other financing options to look into. This includes VC, angel funding, grants, and more. It is advised that you do your homework and conduct a thorough research to find out which option works best for you.
There are several feasible options out there, and all you have to do is find out the best financing option.