Personal Loans For Start-up Businesses

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Don’t let financial hurdles stop you from achieving your entrepreneurial dream of offering customers unique products and services. If you have that idea in mind, start planning today. Whether you need funds for initial setup or expansion, personal loans have you covered.

In this blog, we will discuss how to get a personal loan for your start-up business and maximise it to your advantage. So, read on to learn more.

Are personal loans suitable for start-up businesses?

Yes, personal loans are useful when you need immediate access to funds. There are various advantages you can benefit from, such as:

1. Faster application process
Unlike traditional business loans, the application time and disbursement of personal loans is quicker. This lets you promptly access funds to make arrangements for your start-up business.

2. No collateral required
As a start-up business, you may have limited assets, and providing collateral for a loan could pose a challenge. However, this roadblock is eliminated when applying for a personal loan, as it is unsecured and short-term.

3. Flexibility to use funds
There are no limitations to spending the money, which may not be the case with many business loans. You can use a personal loan to upgrade an IT system, buy new equipment, hire team members and so on.

Factors to consider when applying for a personal loan to fund your business

There are certain considerations that you should know before applying for a personal loan for your start-up business:

1. Credit score
Personal loans are granted to individuals based on their credit profile. Banks will evaluate your credit score. So, check it before you hand in your application. The higher the score, the higher your chances of getting your loan approved. For a higher credit score and favourable interest rates, you should repay existing debts and make timely payments.

2. Business plan
You must have created a business plan, laying out the objectives, strategies and projected value of your start-up. This is not only good from a business point of view but also to showcase your dedication and commitment to lending institutions. This increases your chances of getting the loan approved.

3. Financial standing
Yes, your business objectives are clear and established, but you need to also think about your personal finances for personal loans. You must consider factors like income, outstanding debts, monthly budget and other financial obligations to determine the loan you can take.

How to find the right personal loan for your start-up business?

Here is a guide to help you decide which personal loan is best for your start-up business:

1. Find and compare lenders
Each lending institution has a different interest rate, repayment policy and eligibility criteria. Hence, it is necessary to shortlist those that align with your requirements. Consider and compare all the options available and choose the best one accordingly.

2. Negotiate repayment terms
Once you’ve chosen the lender, carefully review the repayment terms. This includes interest rates, repayment period and other associated fees.

3. Gather loan application requirements
To apply for a personal loan, you would need to submit documents including ID proof, residence proof, income proof, bank statement and credit report. Along with this, you will have to fill out and submit the loan application form duly. So, provide accurate details to avoid delays in the approval process.

How to make the most of personal loans for your start-up business?

The following ways are some strategies to help you maximise the use of personal loans:

1. Make a plan of how you will be spending the money
To help you stay on track of expenses and use the sum diligently, create a detailed budget. Allocate the amount for varied activities. This will help you avoid unnecessary expenses and ensure the optimum allocation of resources.

2. Think about the repayment strategy
This is a personal loan, where non-payment of missing payments can directly impact your credit profile. So, set aside an amount from the borrowed funds for timely repayment and avoid penalties and other charges.

3. Build credit for your start-up business
As your start-up business will grow, you would need substantial financial resources. And that’s where business loans will come into play. For that, you need to work towards building a separate, strong credit profile for your enterprise. This will help you get financial aid easily in the future.

Endnote

Other than personal loans, you can also use your credit card to finance your start-up expenses. Kotak811 Credit Card is a great option for this purpose, as it offers various benefits that can help manage and reduce costs.

Let’s say you need to buy electronics for your team members. Using your Kotak811 Credit Card, you can make these purchases while earning rewards points. You earn reward points for every swipe, which can quickly add up when purchasing high-ticket items like laptops, tablets, or other necessary equipment. These points can be redeemed for shopping vouchers, which can be reinvested in your business or used for personal rewards.

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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.