Personal loans are easy to obtain when compared with business loans. The business loans require collaterals, paperwork, and credit score to get funds. So much of time is taken for approvals. In the personal loans, a good credit score is more than enough for approval. The loans are sanctioned instantly. Any individual thinking of starting a business may face problems getting business loans. Can personal loans really be diverted for business is a common question for most people.
- Simply yes is the answer. We can divert personal loans for business purposes. They don’t require many assurances like business loans. One thing to keep in mind before diverting is that you will be solely responsible for paying the loan. Analyze the business model before proceeding and estimate if it’s really going to be successful.
- Banks never ask the purpose of using personal loans. They may be used for debts, children marriage, educational purposes and much They simply want the amount to be repaid in successful intervals in the form of EMI (Easy Monthly Installments).
Using personal loans for business effectively:
- Consider the funds are ready for business as it’s easy to get personal loans with good credit score. Analyze the business, discuss with your partners and prepare a perfect business plan. The whole project should be divided into phases and assign a time slot for each phase. Like for example, if the business is on software then 3 months for software development, 2 months for marketing and so on.
- If the plan goes as planned, clients will be increased. If it is not working out then a backup plan can be providing services for less cost compared to competitors in the market and then gradually increase the clients. Enter the business world with two plans, plan A and plan B. First plan will be straight-forward as in business model and if luck and is not giving results, plan B should be initiated.
Do not be a victim of fraud.
- We can use personal loans for business purposes. I would not say that your partners may cheat on you for sure but depending on the situations, anything can happen. Ensure that your partners should have an equal share of investment. Make an agreement that all profits or losses are shared by all of us and check the documents twice before signing.
Banks are not interested in small-scale businesses. They earn money with interest. Large funds make more interest profits than approving funds for small businesses. Personal loans are a viable option and at the same time risky too. There are sources like crowdfunding where you get the required funds and some percentage share of the company is to be given to them or returning the money in easy installments. It all depends on the situation and mode of funding you choose.