Borrowing a certain amount of money is one of the main options for the entrepreneurs to get funds for their businesses. For this purpose, entrepreneurs are usually asked to personally guarantee the amount borrowed from the financial institutions. A personal guarantee asks you to pay off the loan even when you are financially unstable. It’s highly unlikely to get a business loan without any personal guarantee if your business has just started.
Banks and other financial institutions are not concerned with how successful you have been in the past with other ventures. The major drawback of signing a personal guarantee for the loan is that you might lose personal assets if the business goes bankrupt. You tend to risk losing all your savings. This is where you need experts like Terry Sandvold to provide you wealth management and insurance advice. They examine your personal financial circumstances to decide the proper mutual funds, stocks, ETF’s or bonds that would perfectly benefit your portfolio.
Here are some guidelines on how to get a business loan with no personal guarantee:
Establish a Stable Credit History
The first thing you need to do is to set up an appropriate business structure so to give a stable look to credit bureaus. For instance, getting the required licenses, tax numbers, so on and so forth. Secondly, open an account in the name of your business with an institution that won’t hesitate to report your credit history to the firms with a major financial player in the global society. You need to clear your past bills or debt if any and improve your credit score before you apply for an unsecured personal loan. Although, it is time consuming, but this must be done at the initial stages to establish a rapport. You can also consider rate shopping i.e apply for multiple loans in order to choose from the best interest rate while your credit score remains unaffected.
Suppliers Play a Role
Suppliers are the best bet for the newly established businesses to get loans with no personal guarantee. They are comparatively easier to deal with than the financial institutions and they are always more inclined toward trading with new customers. There are generally two types of suppliers; peer-to-peer and direct. The former uses other investors to fund your loan which means your loan may be originating from multiple individual investors located around the world. The approval for your application would be easy, but it comes with a drawback i.e. the interest rate is very high. The latter on the other hand, is an online supplier that lends the loan from their company’s capital just like a bank. Unlike local banks, they provide flexibility. You must trade with your suppliers for a certain period of time and pay instantly on the delivery, in order to build a healthy relationship with them. You need to protect yourself from discreditable lenders. Some of the renowned suppliers that may provide business loans without personal guarantee are Funding Circle, Kabbage, Prosper, Street Shares, On Deck and Dealstruck.
Look for Smaller Banks
Major players in the banking industry or other financial bodies follow an approach of take it or leave it, once the borrower does not agree on providing a personal guarantee for the repayment of the debt. Conversely, there’s always a room for negotiation when it comes to smaller banks. You should also take into consideration if they are willing to let go off personal guarantees for the loan you apply for.
Try Opting Credit Unions
Unlike banks, credit unions are non-profit organizations that pass their earning on to the members of their organization. They often operate on a small scale and are more open to negotiate for an unsecured business loan. Big banks have strict lending procedures and because credit union is a non-profit setup, you have better chances of convincing them.
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