If you’re thinking about starting a small business, the first thing to get to grips with is the financial backing you’ll need to get things up and running.
It goes without saying that you’re going to need to use your personal savings, and you might be lucky enough to have some investment from financial backers to give you the boost you need to get things rolling. But most people are going to need to talk to their bank to set up some credit facilities to help cover the up-front costs and manage the inevitable cash-flow ups and downs.
The trouble is that when you’re just starting out in your business, most financial institutions are going to see you as a high credit risk, so they’re either going to be unwilling to provide you with the credit you need, or it’s going to come at such a high price that it’s not going to be something that your business is able to afford.
In the early days of your business you may need to rely on credit cards to help get you through, but another option that might be a solution is unsecured personal loans.
This is a cash-loan that is secured against your ability to meet the repayments. Amounts available will vary depending on your income and credit risk, but could provide you with a sizeable up-front cash-buffer to get your business motoring.
In this guide we take you through some of the steps you will most likely need to follow to land yourself an unsecured personal loan.
Assess your credit-risk
Any financial institution that you apply to for a personal loan will run a credit check on you. You can be one-step ahead and use one of the many free credit-check services to see what your credit score will be.
Explore your options
If you think that a personal loan could be a useful tool to help make your business a reality, make sure that you compare the various options available. Each financial institution or lender will have different fee structures, different repayment options, and each will mean that you are paying more or less for the loan that you are accessing.
There are lots of different types of finance out there. Speak with an independent financial advisor to ensure that the financial structure that you’re considering for your business is what will be right for you. An unsecured personal loan may not be part of that structure, but it is a popular option so worth considering.
Use pre-qualification to ensure that you’re ready to go
If you think you might need a personal loan facility, but aren’t quite sure when you’ll need to access the funds, many financial institutions will offer a service whereby you can go through the bulk of the loan application process, to be confirm as pre-qualified, so that when you are ready to go ahead it’s then a relatively straightforward process.
Ensure that you understand what you’re signing up for
If you do decide to go ahead with an unsecured personal loan, make sure that you clearly understand the fees and charges involved and the repayment requirements. You don’t want any nasty surprises in the early days of your business.
Don’t miss your repayments
There’s a lot to think about when you’re getting your business up and running, but it’s essential that you’re meeting your financial obligations and meeting your loan repayments on schedule. If you fail to meet your loan repayments then this could negatively impact your credit score which will make it harder to access credit in the future.