Whether you purchase an existing business or start one from scratch, personal loans may be one of the sources of money you turn to for your business venture. Depending on the type of business structure you choose (corporation, sole proprietor, partnership, etc.), it is not unusual for some entrepreneurs to use personal loans to fund a business. Also, if you are starting a small business, it can be difficult to obtain small business financing because many lenders do not offer small business loans for startups. Since most personal loans require you to qualify, preparing to obtain a personal loan starts long before you start to complete the application form.
Preparing to Apply for Personal Loans
Some lenders may ask the purpose of the personal loan while others simply qualify you on your personal credit. Since it is a step you need to take before starting a business anyway, you may want to start working on a business plan. Constructing a business plan can also help you determine how much money you need to launch the business and maintain it until the business can sustain itself. As you are preparing your business plan, also take the time to pull your credit report from each of the three credit agencies. Review your credit report to make sure there are not any negative items that may cause you to be denied for any of the personal loans you apply to receive.
Applying for Personal Loans
The best place to start when requesting personal loans is with the bank that holds your checking and savings accounts. Since you have a personal relationship with the bank, it can help in the approval process for personal loans. For each lender you approach, obtain the qualification requirements for personal loans. Review this list to make sure you meet the requirements. If you do meet the requirements, then complete the personal loans’ application and supply copies of any supporting documents the application requests in order to process the loan. When you submit the personal loans’ application to the lender, make sure you understand how long the processing of the application may take. This helps to set your expectations on when you may receive the money you need to launch your business. One thing to keep in mind about personal loans for business purposes is that even if your business fails, you are still personally obligated to repay the loan. Personal loans, therefore, are different than business loans, where the business has its own obligations that are separate from the individual or individuals who own and/or run the business.