According to data released by the Federal Deposit Insurance Corporation, small-business lending is recovering at a slower pace than other types of business loans.
At the end of March, 2014, banks across the United States held a total of $585 billion worth of small business loans, which was only one percent higher than the figure recorded in September last year.
It can be difficult to get a business loan when the economy is still in recovery mode. If you are having trouble securing a business loan, you may want to consider the option of getting a personal loan to start your business.
Understand Your Options
There are basically two types of personal loan for you to choose from, namely, secured loan and unsecured loan.
If you are getting a secured loan, you have to use your home or vehicle as collateral and you may lose your collateral if you fail to repay your loan.
An unsecured loan does not require you to put up collateral, but it usually comes with a higher interest rate since the lender is exposed to default risk.
If you have a bad credit score, you will most likely not qualify for an unsecured loan.
Maintain a Good Credit Score
Your credit score is one of the first things that lenders will look at when they are deciding whether or not to offer you a personal loan.
If you have a credit score of 700 and above, you have a good chance of getting your loan application approved, and you may even be eligible for lower interest rates.
Some of the things that you can do to improve your credit score include paying your bills punctually and reducing your debt-to-credit ratio. If your credit score is low, make sure you only apply for loans that you qualify for.
According to an article entitled “6 Tips for Getting Your Personal Loan Approved“, getting rejected for a loan can hurt your credit score.
Check Your Financial Statements
When you apply for a personal loan, you will most likely be asked to submit a personal financial statement. As such, you have to make sure that your financial statement is free of mistakes.
You can either check your financial statement yourself or get a professional to do it for you.
The advantage of having a professional analyze your financial statement is that he or she can spot and clean up red flags that can lower your chances of getting a loan.
Find the Right Lender
With so many lenders out there offering personal loans, it can be difficult for you to choose the right lender.
Before you start applying for a loan, you should spend some time comparing loans offered by several reputable lenders.
Compare interest rates, maximum loan amounts, repayment periods and overall costs, and choose the loan that best meets your needs.
Getting a personal loan to start a business is relatively easy these days.
The tips above can help you increase your chances of securing the right loan.
About the Author: John McMalcolm is a freelance writer who writes on a wide range of subjects, from social media marketing to running a small business.
Recent Comments