Startup financing can be pretty difficult to secure. This is a roadblock many small business owners face, ultimately causing them to either get turned down out-right or they can’t the full amount they need to start their dream. The numbers are grim. According to Entrepreneur, 53 percent of small businesses applied for funding or credit lines at least once over the past five years, with one in four saying they sought loans multiple times.
Sadly, 20 percent of those applying over the last five years reported being turned down; 45 percent of those who were denied said they were rejected many times. And 23 percent didn’t even know why they were denied. As a result, 26 percent of declined business owners had to avoid hiring or expanding due to frustration with trying to access funds. Instead, they used the money from their own personal savings as well as high-interest credit cards to cover expenses and keep their businesses afloat.
Does this sound like you? We know there’s a better way. Personal loans for business expenses from Credit Direct can help you spread your entrepreneurial wings. Personal loans offer many benefits of small business loans, from increased flexibility to less complicated application processes.
You can get a loan through us for up to $40,000, so you can tackle that remodel, hire that employee, make necessary repairs to the office copy machine or make capital investments that will help your business grow. It’s easy: apply now.
Why a Personal Loan Could be Right for Your Business
Finding the right kind of small business financing can be daunting. After all, there are so many options out there, from lines of credit to secured loans to crowdfunding. But there’s one option not many business owners even consider and that’s a personal loan. And yes, you can use a personal loan for business.
Determining if a personal loan for business use is a good idea will depend on your specific circumstances. In many instances, it will make more sense to apply for a small business loan for your business needs. However, there are certain situations where a personal loan will make the most sense.
If your bank or alternative lender has repeatedly turned down your business loan application, whether your personal credit score isn’t good enough or your business doesn’t yet have strong enough cash flow, you can try for a personal loan instead.
Even if this is your first attempt at financing, here are a few scenarios in which you might consider a personal loan over a business loan:
You Haven’t Opened Yet
Small business lenders don’t usually feel very confident issuing loans to startups because they often haven’t even opened their doors yet. To inspire confidence, a small business owner must have a solid business plan in place, reliable cash flow, and a visibly thriving facility – all of which can improve their chances of approval. Why? These things show the bank that you’re a good risk and that your business is financially stable enough to repay the debt, backed by a sufficient track record.
If you’re a brand-new business owner, on the other hand, you don’t have any of this. After all, how you can open and thrive if you don’t have the money yet? If you are still in the early stages of forming your business, you’re probably going to have more luck getting approved for a personal loan.
You Only Need a Small Amount But Can’t Afford High Interest
Many banks are wary of issuing small business loans in small amounts, as they yield less interest for them yet cost the same amount of work as a larger, business loan does. So, if you’re seeking a business loan amount under $25,000, you probably won’t qualify for a traditional term loan from your bank.
You could turn to alternative lenders, who will issue loans for as little as $2,500, but those will cost you dearly. They have very high interest rates due to the high risk involved in lending to such a wide range of borrowers. If your desired amount is small, apply for a personal loan instead, which may come at a rate that you can afford.
You Have No Collateral
Traditional loans demand collateral for approval. In fact, insufficient collateral and insufficient cash flow are the two top reasons cited by banks as to why they frequently deny small business loans. You don’t usually need to put up collateral for a personal loan, so if your savings or investments are on the thin side and you don’t want to offer your home as collateral, consider a personal loan.
Benefits of Personal Loans for Business
From easier qualification to more flexibility, there are many advantages offered by personal loans for business use. Here are just some of the benefits:
- Personal loans are easier to qualify for than business loans. That’s because lenders only rely on your finances and credit history as one person rather than a whole business entity. If you have good personal credit, you should have no problem getting this type of loan.
- You can repay a personal loan monthly, which makes it easier to budget than the daily or weekly repayment schedule demanded by many online business lenders today.
- You have more flexibility with how you actually use the funds. So, you could divide the money as you see fit between business and personal expenses, or address any other needs you may have. Personal loans are especially ideal options for the self-employed or sole proprietors.
- You can secure a low APR if you have a good to excellent credit. Many personal loan providers have rates as low as six percent, while many online business lenders could have rates as high as 20 percent.
Arming yourself with all the information you can is key. Talk to a Credit Direct employee today to advise you on how to choose the best path when it comes to personal loans for business expenses.
Contact Credit Direct
Contact us today and fill out our form for more information. We respond to all requests within 24 hours. We can help you grow your business with personal loans!