If you need a relatively small amount of cash to refinance your business, using a personal loan could prove to be the ideal answer. Self-funding in this way can be an easier route than applying for a business loan. For anyone wondering if it is a good idea to refinance your business using a personal loan, read on to find out more.
Can you refinance your business using a personal loan?
There should not be an issue with most lenders allowing you to use a personal loan to refinance your business. This is because personal loans can be used for almost anything, be it starting a company, or simply paying for business expenses. It is worth noting that some lenders will have restrictions in place, so be sure check this while doing your initial research.
How can a personal loan help my business?
How much you can loan, and whether it will prove beneficial for your business, will depend on a number of different factors. This includes your personal credit history, the financial wellbeing of your business, and how much you want to borrow. You can find personal loans online, which makes it more convenient to apply. Some of the advantages of a personal loan include:
- Flexible usage
With lenders providing greater flexibility over how the funds can be used, this allows you to divide the money however you need. This works especially well for individuals running their own business, or anyone who is self-employed.
- Easier qualification
Compared to a business loan, personal loans are easier to qualify for. This is because the lender will look at your individual credit and finance history. A number of start-up businesses tend to choose this option as it is less complicated to secure funding.
- Cash flow management
Personal loan repayments are usually set-up to occur every month. In many cases this makes it easier for businesses to manage their budgets, especially their cash flow.
- Low APRs
The better the credit rating you have, the lower the APR rate you will be able to achieve. Personal loan rates have continually fallen over the past ten years, so if you have taken care of your personal credit score, this puts you in a good position to help your business.
When should I apply for a personal loan for my business?
If you are a small business that has been trading for a while and are in need of a cash injection, then it makes sense to apply for a personal loan. It allows you to restructure and clear away any existing debts that is hampering the growth of the business. You may also owe money to a number of different sources and consolidating repayments to a single lender makes it much easier to manage.
Compared to business loans, personal loans do not require the same sort of collateral in order to secure them. If you have enough personal collateral, the lender usually has no issue lending against you, compared to a small business. There is a lot more scrutiny placed on business loans, as banks are concerned they won’t get their money back. When it comes to a personal loan, they feel a lot more secure they will get secure their money in the end.