How to Start a Business With a Personal Loan

Most new businesses fail because of a lack of capital, not being able to get the money to continue in business. More than three-in-four businesses run for up to five years before running out of money because sales can’t keep up with expenses.

So it turns out that getting a loan might actually be able to keep you in business rather than leading you to ruin.

Rates on private business loans have come down from above 25% in the 80s to an average of 13.4% today, and loans approved by the Small Business Administration are even lower.

Loan Rates to Start a Business

Business Loan vs. Personal Loan

Business loans almost always offer a lower interest rate because business assets secure the money. Lenders can repossess or force you to sell business assets to meet loan payments. That’s not the case with a personal loan which requires no collateral.

Start the business on as much saved money as possible, at least to the point of having a workable business plan and nearing sales. Payments on a loan will begin within a month, so you’ll need a way to start making those either through sales or using the unspent loan.

Using a Personal Loan for Business Startup

Startup Business Loan Rule #1

Take the business as far as possible on your own money and only take a loan when sales are near.

Only use a loan to start low-capital types of businesses that can be started on $30,000 or less.

Startup Business Loan Rule #2

Plan out the year’s expected cash needs and keep a cash reserve to make loan payments.

Startup Business Loan Rule #3

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