Starting a business can be nerve-wracking because it takes a lot of guts, not to mention, money. It’ll also be a while before you start seeing any profits, so you need to have the dedication and patience to see your business grow. However, before you can do anything else, there is the matter of financing your business idea.
There are many ways to get the funding you need for your business. You can use some money from your savings, ask for help from your family or friends, or apply for a loan from official lenders. When it comes to this last part, you can get a personal or small business loan, but how do you tell which one is the best option?
What Is a Personal Loan For?
Generally, you can use personal loans for anything as long as you pay your fees on time. Some people use it to shoulder aspects of their business like payroll or rent, but that depends on the borrower. Others apply for this kind of loan if they plan to make a big purchase, like buying a house or a car.
You can also use a personal loan to pay off debts, consolidate credit cards, or fund home improvement plans. Again, the uses are entirely up to the borrower, but sometimes lenders might ask why you’re applying for one.
Do Lenders Approve Personal Loans for Business Use?
There are no hard and fast rules regarding the use of personal loans, so a lender could approve your application even if you intend to use it for your business. However, you should be prepared to submit some business-related documents for the sake of the lenders’ records. If you’re applying at a bank, they may ask for tax returns for your business, a business plan, or some pay stubs.
It’s also a good idea to be upfront about what you intend to do with your personal loan. Doing so ensures you’re not breaching any loan terms, and it lets your lender know that you’re trustworthy. If you have any doubts, you can ask your lender what they do and don’t approve regarding the loan agreement.
Should You Use a Personal Loan to Fund Your Business?
Ultimately, the decision to use a personal loan for business purposes comes down to you. The amount of money you’ll need for your business may be the biggest determining factor in this situation because most lenders only approve a maximum amount of $100,000. On the other hand, business loans can accommodate as much as $5 million.
You should also consider that personal loans are going to reflect on your personal credit history. That means if you fail to make a payment on time or at all, that’s going to reflect on your personal credit score. It can greatly affect your other financial endeavors, like applying for a new credit card, a car loan, or a mortgage.
Personal loans are versatile in the way you can use them, and you can certainly apply them to your business. Remember to be upfront with your lender about your plans to make sure you aren’t breaching any terms. It’s also great to fund your small business if the money you need isn’t more than $100,000.
If you’re looking to apply for a, personal loan for your business, Opelika Finance is the best company for you. Our goal is to help all our clients get the perfect plan for their needs. Contact us today for a consultation!