Why Entrepreneurs Should Opt for Personal Loan?

by Vinaya HS on July 22, 2017

in Finance

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Any business, no matter scale or size, requires seed capital or an initial investment to get started. While some do not need to take on debt to raise this initial capital, the key is how to make debt work for you.

There is obviously a cost involved when it comes to starting a business and there also operating expenses that may extend well beyond your revenue, especially during the first few years before you break even or when you’re trying to scale up. While there are many options for raising capital, all of them come with pros and cons.

Many venture capitalists and angel investors would be happy to funds to set up your business in exchange for a stake in your company. While this seems like a good option, parting with equity I a risky option considering that most people expect their business to be valued well beyond their expectations in a few years’ time.

You may be also able to secure a business loan, but it is likely to be secured by means of a collateral like property or other assets like gold or fixed deposits, but should your business not turn a profit you stand to lose your collateral.

A good option is to go into personal debt, accumulating personal loans which is a viable option, as long as your personal credit is in good shape, unless you already high debt that could adversely impact your credit score. Securing the loan with a personal asset may help you get even better interest rates and conditions, but by the aforementioned logic, providing collateral means you stand to lose it if you are unable to repay the loan.

A personal loan is a good idea if you are hopeful of turning a profit relatively early according to your projections. The fact that you will have to pay an equated monthly installment once the loan is disbursed should also be taken into account.




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