- May 9, 2020
If you are looking to start a new business or want to expand your current business, you will need to take out a loan. There are many types of business loans, but all of them have different features. Since each loan carries different interest rates and repayment terms, it is good to take stock of all of them.
Business loans are different from small loans or cash loans. They can be short term as well as long term depending on the need of funds. Further, interest rates for business loans can be a bit higher.
If you want to fund your business, you would like to consider options that are easy to avail and carry low-interest rates. If you need a small amount of money, you will prefer to take out a small business loan. These loans come with a repayment period of 12 months. You will pay down the debt in fixed instalments, but it can be quite expensive.
What if you are about to start a new business? Won’t it be an expensive offer? Further, not all lenders approve such loans for start-ups. Before you grab any deal, you need to carefully look over how much funds you need, your repaying capacity and the purpose of borrowing money.
The priority should always be cash. If your savings are not enough to meet your business needs, you should turn to your family, friends and grants from government agencies. This is the easiest and the most affordable option because you do not have to pay interest. However, you will have to make sure that you will pay back the money on time.
Here are the low-interest loans you can take out to start a business.
Loans For Unemployed
No lender will give you a business loan if you are about to start a new business. Business loans generally aim those borrowers who have at least two years of experience in running the business. In case of a start-up, you do not have any good income source, which is why the only loan available to you is loans for unemployed.
These loans are an ideal option to fund a start-up. However, the size of these loans is not significant. These loans are perfect if you need a small amount of money. In the beginning, when your business does not generate income, you can use your additional income sources to pay down the debt.
Loans for unemployed cannot help you if you need a large amount of money. You can have a business loan signed off on if you have at least two years of experience in running the same business and foresight that you will make the right amount of profits.
If you are new to your business, you should take out a start-up loan. They are more affordable than business loans. The term of these loans can vary from one year to five years, depending on the amount you borrow. However, most of the lenders do not allow for the repayment period over 36 months. To take out start-up loans, you will have to prove your lender how likely your business will be successful down the road.
Bad Credit Loans
What if you have a bad credit rating? All business funding sources require you to have a good credit rating. It can be hard to fund your start-up in case your credit history is not up to the par, but there is still one option – bad credit loans.
These loans can help you fund a start-up as well as your current business. One of the best advantages of these loans is you do not need to put a security against the money you borrow. Further, the lender will also not ask you to arrange a guarantor. The lender will not ask you how you are going to use funds, and therefore you do not need to worry about submitting your business plan.
A bad credit loan can be an excellent way to finance your business, especially when you are not able to take out start-up loans.
Personal loans are those loans that you can take out to fund any expenditure. You can use personal loans to fund start-ups too. In other words, they are unsecured loans and allow you to borrow a large amount of money, as compared to bad credit loans. The good thing is you will pay down the debt over an extended period. It can last between one and five years.
If you want to open a start-up, you can use any of the funding sources mentioned above. However, some of them are generally available to good credit borrowers. If any lender lends you money despite an impaired credit rating, you will end up paying high-interest rates. It is usually recommended to make your score better before taking out a loan to fund your business.