Starting a New Business? 5 Ways a Personal Loan Can Help!

To kick-start a business in the dynamic world of today is no easy task. After all, it takes preparation on a number of levels – right from mental to physical, from on-paper to on-ground and from emotional to financial. While most of this preparation is solely dependent on your own skill set, there is one aspect wherein you can expect some help, and that is finance.

If you have a good project lined up, which is both pragmatic and promising, chances are you can quickly get a business loan to fund it. However, most Business Loans would need you to:

• Have a good credit score for the business
• Have an established company (with a minimum of 1-2 years in existence)
• A regular flow of revenues
• P&L statements
• Income tax returns
• Audit reports
• A detailed business plan

Hence, if your business idea is new, and your enterprise is not registered yet or doesn’t have the creditworthiness, experience or income to show for, you may not be eligible for a Business Loan. In such cases, you can always look forward to getting a personal loan. Of course, you may not qualify for as high an amount as in the case of Business Loans, but when you are right at the start of the race, a few small steps are better than one big leap.

Personal Loans for Business 

Now that you know that a personal loan might, in fact, be your best bet to kick-start your venture, let us discuss the various aspects related to the same.

1. Collateral

Thankfully for you, Personal Loans are essentially unsecured and therefore do not need any kind of security against the loan amount. Your eligibility for the loan is merely dependent on your age, your employment history as well as your credit history.

2. Loan Amount

Depending on your eligibility, business requirement, and the ability to repay the loan, you can expect to get anywhere between Rs. 10,000 and Rs. 50 Lakhs. So, you can procure an amount that meets your expected expenses.

3. Credit Score

Given that Personal Loans are unsecured, the only way to get these loans is through an excellent credit score. A score of 700 or more is mandatory to be able to get the credit on favourable terms. If it happens to be below 700, you can expect to either being turned down or being given the loan at an exceptionally high interest rate, most likely 15% per annum or above.

4. End-Use

The amount disbursed as Personal Loan can be used for almost any purpose that you deem fit. Unlike a Business Loan, where the lender keeps a close eye on the use of the amount towards the stipulated cause, a Personal Loan offers you with unprecedented freedom to spend money on anything you deem fit.

5. Liability

In case of default on a Business Loan, you stand a chance to be sued, and the lender reserves the right to collect the outstanding amount from you.

To put it simply, a Personal Loan works best for a business, when the enterprise hasn’t been established or is still in the very nascent stages. It can prove to be your best bet if you enjoy a good credit score and if you have a steady source of income to demonstrate your ability to repay the loan amount. Of course, being in the ideal age bracket of 23 to 60 will further prove to be in your favour when applying for this credit to kick-start your business.

So, what are you waiting for? Whether you wish to apply for SBI Personal Loans or a similar credit from some other bank, just go ahead and file your application. After all, your business goals shouldn’t have to wait for the sheer lack of finances!