People use personal loans for a variety of reasons, such as consolidating debt, paying down medical debt, or expensive car repairs.
But there is something else that the average consumer should know: a personal loan can be used for your small business.
Despite the label, a personal loan might be what it takes to keep your business going. The personal microloan can be used for certain expenses such as:
• Equipment (things like printers, tools, copiers, manufacturing equipment, cubicles, etc.)
• Office space (to buy or rent)
• Marketing and advertising (digital, promotions, printed, etc.)
For any type of business expense, if your business doesn’t have the additional capital but needs cash to grow, then a personal microloan is a feasible option.
Small Business Loan vs. Personal loan
Most small businesses that require the funds necessary to grow their business tend to seek a small business loan. This makes sense since a small business loan is generally beneficial to the small business owner.
In certain situations, the small business loan helps the business owner purchase high-value items, such as equipment, inventory, or raw materials. However, just because the small business loan is the industry standard doesn’t always make it the right solution.
The biggest problem with a small business loan is the strict requirements. This is not only true with the eligibility requirements, but it also comes into play during the application process. These are some of the biggest challenges:
• Lengthy application process that can consume hours of valuable time
• Documentation requirements, such as providing a business plan, tax returns, references, and financial data.
• It can take a long time to receive funds (even after getting approved), as the entire process can take up to 90 days.
• There are up to seven different types of small business loans … choosing the one that’s right for you might take some time.
Although it is common to initially assume that a small business loan is the best option, you may find that these requirements are difficult to meet or that it will take longer than you want to get your business moving.
Is the personal loan application process better?
The short answer is that the company offering the personal loan can make an application and a decision regarding that application within one day.
With a personal loan, you don’t have to go through so many obstacles. Instead, it is much easier to acquire a loan in a timely manner (and without the hassles mentioned above).
Some of the main benefits of a personal loan for business use, especially compared to a small business loan, include:
• Simplified application process that can be started online or by phone in minutes
• Fewer documentation requirements
• Decision the same day (not always, but most of the time)
• Fewer complications, the main decisions being the payment schedule and the loan amount.
Simplicity and convenience alone are reason enough to learn more about using a personal loan for your business.
Making a final decision
Now that you understand that a personal loan can be used for your business, you must decide if this is the right financial solution for your business at this time.
When comparing this option to a small business loan, ask and answer the following questions:
• How do you plan to use the funds?
• Do you need the money for the foreseeable future or can you afford to wait?
• How much money do you need to borrow right now?
• Have you collected all the information you need for the application?
• What type of loan is most affordable in the long term?
By answering these questions, and at the same time consulting with a lender for each type of loan, you will be in a position to make an informed and confident decision.
Despite the name, you can use personal loan funds for a variety of business expenses. There are several lenders, but the benefits and convenience of a personal loan make it a good consideration for any business.