There are many reasons why you might want to inject cash into a business. Maybe your customers have not yet paid what they owe or you need some cash to get into a new market segment. Regardless of the reason, when you need the cash, you either look inwards at areas where you can cut some costs to come up with the money or you look outwards to find lenders who are willing to loan you the money. If your business does not have the history or annual revenue to support getting a business loan, the next best option is to get a personal loan. The best thing about a personal loan is that it can be used for anything, including to handle business expenses. Fortunately, there are several options available to you if you decide to follow this route.
Banks and Traditional Lenders
Banks and traditional lenders should be your first options when looking for a personal loan. With this option, you can get a bigger loan with favourable payment terms. Banks also have lower interest rates than other lenders. As for the repayment period, you can be allowed to repay the loan for up to 10 years, depending on the amount and the terms set out in your agreement.
Online Personal Loans
As technology has matured, it has allowed lenders to better fill a market gap that existed in the form of online personal loans. These types of loans are a good option for those who need fast loan acceptance and the convenience of getting the cash they need without having to walk into a bank or visit a lender.
Online personal loans are an excellent option for those with low credit scores and who cannot get a loan from other lenders. The most important thing to remember here is that if you have a low credit score, your loan might not get approved. Also, there might be other reasons why your loan is not approved, and if you constantly run into this problem, you could follow these 4 Tips to Get a Loan Accepted. A simple search online will lead you to lots of different lenders. If you do not know where to start, it would be a good idea to go with a broker like New Horizons. New Horizons lets you find the best rate for different types of loans, including short term loans and they work with some of the best lenders in the market. They have an excellent 90% loan acceptance rate and your loan can be approved in as little as 15 minutes.
These types of loans are quite new, and they involve borrowing from an individual or a group of individuals as opposed to an institution. The simplest form of this type of borrowing is where you visit a website, post the amount you need, and investors decide whether to loan you the money or not.
Even though your credit score does come into play here, the investors in these types of arrangements usually give greater leeway than other lenders. Another upside is that the interest rates are usually quite low, and these loans come with some very lenient terms.
Sometimes, you need to pay for business expenses using a loan but do not have a strong enough credit score or a good enough credit history to inspire confidence in your lenders. When you find yourself in these situations, you can opt for a co-signed loan. These are loans where more than one party is responsible for the loan, but the other party is only obligated to pay if you default. The co-signer, in this case, acts as security for the loan. If you find a co-signer with a good credit score, you increase the chances of your loan being approved faster.
The main advantage of co-signed loans is that you can borrow a bigger amount under favourable conditions. However, the co-signers can be negatively affected by the loan because it can show up on their credit report, and late or missed payments can impact their credit score. This is why it is so important to be completely sure about your ability to repay this loan to avoid destroying relationships.
An unsecured loan is the most common type of loan where you pay a portion of what you borrowed monthly. The amount you owe is usually subject to an interest rate, and because these loans do not require any collateral, they are quite easy to get. The only downside of getting unsecured loans is that the amount you get is quite low because of the risks associated with them. The length of the loan might also be very short, usually about 5-7 years for most lenders.
If you are unable to get a loan through other means, you might ask your bank for a secured loan. A secured loan is where you put up collateral against the amount borrowed. A good example of this type of loan is the home equity loan. Here, your house is the collateral, and if you do not repay the loan on time, you might lose your house.
A secured loan is very risky because if your business does not make it or you miss some payments, you stand to lose the property or item you used to secure the loan. This is disastrous because, in most cases, the item put up as collateral usually has a higher value than the loan borrowed.
Friends and Family
If other loan options do not look favourable to you, you can turn to friends and family for a personal loan. Before going this route, you should prepare yourself to treat the people who lend you money, like anonymous third parties. This is so that you feel obligated to repay the amount borrowed without taking advantage of your relationships.
The amount you can borrow here will depend on the number of people in your circle, as well as how much they trust you. Typically, you will not be able to get a huge amount, but it might be enough to help you take care of immediate expenses.
If you have someone who trusts you wholly in your family or circle of friends, you might also ask them to take out a loan on your behalf. Ensure you have the ability to repay the loan if you decide to use this last option.
Payday loans are only a good alternative if you already have a job and are trying to get a business running on the side because these loans are offered against your pay check. Payday loans need to be repaid within two weeks, failure of which can cause the amount owed to increase dramatically. Although they have very fast approval times, their interest rates are usually much higher than those of other lenders. The interest rates for these types of loans can be as high as 400%. Payday loans also do not require any collateral.
If you decide to take a payday loan, you should know that even though you might get the exact amount you need, as long as it is below your monthly payment, these plans usually come with some additional fees. For this and other reasons outlined above, payday loans should be your last alternative.
There are lots of different options available if you need a personal loan to take care of some business expenses. Ensure that you go through the fine print carefully so that you do not end up with a loan that will haunt you for a long time.