Starting up a business is exciting, and you’ve likely been thinking about it for some time now. However, getting the money to do so can be more of a challenge – especially as banks are reluctant to lend to startups and getting angel or VC funding is not for everyone. What options are there then? Well, you could finance the new business with your own cash or personal lending. If you are planning to take out a personal loan for your company, what are some tips you need to keep in mind?
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Consider The Approval Process
Gathering all of the sources you need and planning out your business with care and precision will all be for naught if you are unable to actually get approved for the loan. You must start thinking about the loan well in advance. Work to get yourself into a favourable lending position. For example, aiming to pay off those credit cards, or at least some of them, before applying would be wise. And start early. Talk to your bank long before you are going to need the money because it can be a long process from application to approval. Also, don’t necessarily stick with whoever you already bank with. Banking, even commercial banking in 2014, is competitive. So before marrying yourself to a bank, shop around. Banks like Clydesdale Bank in the UK are open to business as are Chase, BoA and Morgan Stanley are worth a try in the USA. Don’t forget there are other options too such as P2P lenders and local credit unions. There are options: use them!
Save What You Can
The fact that you can obtain a loan to help you with your business is wonderful. However, this does not mean that you need to take out the most tremendous amount of money possible. Be reasonable with your expectations. While you are planning out how you will get approved for the loan, you should also be working to save up as much money as you can. Doing so ensures that you do not have to take out as large of a loan as you once would have. Use a tool like inDinero to better manage your incoming revenue and outgoing payments.
Consult with Business Partners
Certainly, some people do start companies by themselves, but many need a partner to help keep things afloat. You should be having serious conversations with your partner about the loan, and you must both remember that this is a business transaction. The both of you need to go on that loan as co-signers. As a result, your business partner must also have a healthy financial history or he or she could prevent you from getting approved.
Frame Your Payment Plans
You should be meeting with a professional to determine at least the approximate cost of your monthly payments, and you must determine if these amounts are feasible for you. Predicting the exact success your business will have is very difficult, so you need to be prepared. You do not want to find out that the money is unavailable to pay the loan. Think about what you can reasonably afford in terms of this loan, and set up a plan for how you are going to pay it.
Pay Back The Loan
Many people are so excited when they first get a loan that they really do not think about paying it. Remember, you must make sure that you send these payments in a timely manner each month. Failure to do so means that you are not only risking your personal credit score, but the success of the entire business as well. If you are comfortable with doing so, consider automatic withdrawals so that you do not need to worry about the payments.
Financing a business is definitely an exciting task, and you can make the process better by following these tips and suggestions.
About Carson Derrow
Excellent tips of advice! Personally, when it comes to any investment or loan, it’s important to do research before deciding on any option. This can help figure out who best fits you and your needs plus save money in the long run. Thanks for sharing your info!