If you’re looking to become an internet business owner, financing is likely a major concern.
With internet hosting company 1&1 estimating that as many as 53% of Americans have considered starting their own business, securing business funding is currently on a lot of home entrepreneurs’ minds.
If you’re thinking of starting a home internet business, why might you choose a personal loan over a business one? And what do you need to know about securing one?
Personal Loans Offer Flexible Option
Securing financing can be a stumbling block for many would-be business owners, as banks are often reluctant to fund start-ups.
As pointed out in the article “Top 10 Things You Need to Know Before You Get a Personal Loan“, a personal loan may offer a quicker and more flexible solution, which is easier to secure than a business loan.
Personal loans often have an easier application process and need less in the way of existing assets and security.
Secured Versus Unsecured Loans
Personal loans can be broadly divided into two types: Secured and unsecured.
Among the things to look at:
1. Secured loans are secured against an asset that you own. This is often property, but can also include assets such as a car or boat. Secured loans offer lower interest rates, longer repayment terms, and a higher borrowing limit. However, you stand to lose your assets if you can’t repay the loan.
2. Unsecured loans, as the name suggests, aren’t secured against anything you own. They usually attract higher interest rates and lower borrowing limits. Loans are offered based on whether you can show that you have the credit, character and capital to repay the loan.
Tips for Finding a Personal Loan for Your Business
If you decide a personal loan is a viable way forward for starting your home business, what are some tips you can follow to increase your chances of getting the right loan for you?
• Shop around – As well as banks, you may be able to get a loan from a credit union or a peer to peer lender. Wherever you look for your loan, be sure to approach reputable lenders only and do some research online and by asking around to find out who is trustworthy. Compare interest rates, fees and APR to find the best deal;
• Sort out your credit score – Lenders will want to see your credit score. Although a bad score won’t necessarily stop you getting a loan, it can be a hindrance. Take the time to find out what’s on your credit file and what it means – there may be some items you can deal with in order to better your score;
• Ask about fees and penalties – As well as fees for late payment of an installment, some lenders will charge you a fee if you pay off the loan too early. Always read the fine print so you understand exactly what you will pay and when;
• Be honest about your intended use -Some lenders won’t have many restrictions on how you can use the money, while others will only be willing to give you a loan for a specific cause. Be honest with your lender. As well as keeping things above board, you’ll be giving them a chance to give you the best advice for your situation;
• Only borrow what you can pay – Taking out a loan can be a boon when it comes to cash flow in the early days of your business. However, if you over stretch yourself you risk running into financial problems, being unable to repay, and damaging both your credit score and your business.
If you’re looking to start your own home internet business, a personal loan could give you the injection of cash you need.
By shopping around and borrowing sensibly, you’ll make the right choice for you and the right investment for your business.
Photo credit: Image courtesy of Vichaya Kiatying-Angsulee at FreeDigitalPhotos.net
About the Author: Tristan Anwyn writes on a wide variety of topics, including social media, SEO, personal loans and home internet business.