There are lots of options to finance a business before and during its operation. It makes sense that most entrepreneurs take out specialised business loans either to cover sudden expenses, aid in expansion or have a bit of capital headroom. Several more consider various alternatives, like personal loans.
Personal loan offers are available almost anywhere, from providers such as RapidLoans.co.nz to local lending centres. Anyone can apply for them – even business owners. But, are they really good options for the latter?
The 2008 global financial crisis almost brought the world’s financial system to its knees. This was when the global bank Lehman Brothers collapsed, prompting the global economy to use massive, taxpayer-financed bailouts to save what’s left of the industry.
This is why today’s banks are more cautious with lending. The statutes governing business loans grew tougher, leaving a number of small-scale entrepreneurs with very few opportunities. Today’s business loans go through various processing levels before getting approved. For small business owners being left out (more so if they have sub-par credit or revenue numbers), they’re left with faster, often more expensive options.
Business Expenses And Personal Loans
Personal loans can be good alternatives, but only if they’re used properly. The amount of bureaucracy required by traditional loans make personal loans more appealing (not to mention the better chances of getting approved and getting lower rates).
Furthermore, personal loans don’t have borrowers worrying about insufficient collateral. This is why they act as alternatives for business owners who need small, quick cash without thinking about collateral issues.
What to Watch Out For
Taking out a personal loan is not straightforward. Applying for one and using it for business means the mixing of company and personal finances. Enterprises in their earlier stages may not suffer, but it’s a different story for more tenured ones. Lastly, personal loans may come with closing costs, which means you’ll get less than what you applied for and pay interest for the original intended amount. Don’t let this fact be a surprise.