28 Aug Startup Capital and You – Funding via Personal Loans
There are many of us who can be dissuaded from starting a business, simply because they believe that huge outlay of capital is needed. However, there are many ways in which we can fund and grow a business, and this doesn’t always mean taking out expensive business loans.
Why Use a Personal Loan?
If you’re the owner of a large empire, then it makes sense that a business loan will be required. A business that has managed to sustain an untarnished reputation and a healthy profit will normally have access to a range of funding options at some competitive rates, you can apply easily on this website.
However, those who are yet to open their doors to customers may find that although there are business loans available, they can be difficult to obtain, or expensive if a loan is approved.
This can be due to the fact that a business that is yet to have a record of its dealings is open to more prodding, purely due to the risk being taken by the lender.
Business loans allow those with a business to borrow a large sum of money upfront, but this can be ill-advised sometimes.
Consider this, you have just invested a large sum of cash into renting two properties for an annual term in order to sell your wares. However, your items aren’t gaining much traction, or it becomes clear that the premises aren’t as situated as we first thought. This can mean that the business can be over before it’s hand chance to shine.
However, breaking down your business model into more manageable chunks allows us to make plans that don’t require as much expenditure. An example of this can be a trial run with a specific product. If you don’t invest as much it’s easier to recoup from, which means that the worst-case scenario is that you break even.
A personal loan may give you less than a business loan would, but it can be much cheaper during the startup process. It also allows you to break down your business into smaller projects, which means that more focus is being invested into each aspect of the business.
How a Personal Loan Helps with Marketing
Let’s make no bones about it, there are plenty of companies out there who will state that give you unbelievable results when it comes to marketing, but these can come with a high price point. If we were given access to a business loan at the start of our business journey, it would be easy to assume that such costs are a representation of the market as a whole.
Having less to work with means that we’re making the necessary enquiries as to how well a marketing company can serve us. This doesn’t necessarily mean the service will be cheaper as a whole, but it does mean that we’re making the right moves for a successful marketing campaign.
Even if the company did transpire to be uninspiring, you could at least be assured that you haven’t overspent and there are still other avenues available.
There is Less Risk Associated With a Personal Loan
When looking at business loans, it will often be the case that if you’re still to start trading, then you’re in for a difficult ride. There is nothing underhand here, but your business is treated as a separate entity. The best way to look at this is by assessing your own financial situation.
If you had not taken any credit out in any form, your credit report would effectively be a blank page. This means that lenders could see you as a potential risk, simply because there is nothing to build a profile on. This means that although credit could be offered, it may be more expensive than those with a more solid credit history.
The same ethos is applied to a business loan. If a business is yet to trade, then it can be difficult to ascertain its reputation, which means finance can be more costly. It can also mean that you may have to use assets as collateral.
However, as it’s more likely that you will have built up a personal credit history, then access to credit is much easier. Many personal loans for smaller amounts will be unsecured, so you don’t have the worry of your assets being at risk looming over you.
Using a Personal Loan in the Right Way
While there are many pros in taking out a personal loan in relation to your startup, you still need to ensure that you’re in a position to repay the debt. With this in mind, you should look to ensure that you are fully aware of any interest rates, how long the loan will run for and that you’ve applied for the right amount.
Working out your finances beforehand means that you can plan for any shortfalls, without placing yourself in financial hardship.
It’s important that we apply for the right amount first time, as making a series of loan applications can be seen as over borrowing, which will raise red flags with some lenders. Should you need more capital moving forward, then it can wise to treat each investment as a project. So rather than applying for everything you need in one swoop, you should break down the business model into separate projects, and look to build it up in this manner.
Of course, there will come a time when further expansion will require a business loan, but there’s very little reason to opt for loans that are just too much for a startup to contend with, when you can carry out a little research and build your company in a more productive manner.