Source of Capital for Funding Your Business
When you’re thinking about starting your own small business, one of the first things you’ll need to consider is capital. After all, it takes more than just a great idea to get your company off the ground. You’re going to need money for production, marketing, and even hiring employees too. The most obvious place to look for funding when you want to start a new life as an entrepreneur, is towards a business loan. However, getting this type of loan isn’t always as simple as it seems.
To successfully apply for a business loan, you’ll need to show a lender that you’re a profitable company worth taking a risk on. If you’re a pre-revenue startup then acquiring funding can be a bit more difficult. In these situations, you might decide to turn to a personal loan for your capital needs.
Can You Use Personal Loans?
The first thing you’ll need to do is check whether your lender allows for personal loans to be used for business purposes. Some lenders will permit you to use your personal loan for entrepreneurial reasons – to a certain extent. For instance, you might be able to use the money you borrow to buy a new car for your business and set up a home office. However, there are companies that are very strict about lending to people and businesses separately.
It’s important to be honest with your lender when it comes to applying for your loan, because your lender may ask you to pay back the loan immediately plus the full interest expected if they discover that you were using the money for something that they don’t allow. While personal loans don’t come with the benefit of being in your business name, and therefore not affecting your personal credit – they do have some useful advantages. For instance, it’s much easier to get a personal loan from Earnest rather than go elsewhere for a business loan. What’s more, you could find that the rates on a personal loan are better too.
What Kind of Loan Should You Get?
Ultimately, there’s no one right way to fund when you’re trying to develop an exciting new venture. While a loan is usually the most obvious choice, there are plenty of alternatives out there, such as angel investing, and even crowdfunding for some people where you can bring on a group of investors in order to raise a large amount of capital.
The most important thing to remember if you choose to take a personal loan out, is that if you fail to keep up with your payments, you’ll have to deal with the repercussions, rather than the problem being in your business name. Additionally, it’s worth noting that a lot of lenders will refuse to lend any kind of money to a company that isn’t established. You may need to look into alternative forms of funding if you can’t apply for a business loan for your new venture, and your loan provider won’t allow you to use a personal loan for company reasons.