Capital is essential for business growth, expansion and crisis management. Whether it’s working capital requirements or launching a new product or service, you need funds to tap into opportunities. Thankfully, you can avail funds from various financing solutions, including a personal loan.
With no restriction on utilisation and a collateral-free nature, personal loans are a viable financing option for your business. Some lenders even extend pre-approved offers, granting access to instant funding, which can help during downturns.
Read on to learn how a personal loan can be a viable option for your business.
Benefits of Availing a Personal Loan for Business Purposes
Considering the top features of personal loans, it comes as no surprise that it can be a viable option for business expenses. Here are some benefits of doing so.
1. No Restriction on End-Use of Funds
Personal loans grant you complete control of fund usage, and this benefit offers significant advantages for a business. Unlike other types of loans, you don’t have to spend the sanction for a given purpose only. You can use it as you see fit, without any hassles.
Whether you use these funds for covering payroll expenses, paying suppliers, purchasing new machinery or leasing a new workspace, the end utilisation depends upon the needs of your business. This flexibility is especially crucial for businesses, as you may have a wide array of expenses.
2. Easy Loan Repayment with Flexible Repayment Options
A personal loan offers you a flexible loan repayment structure, and this is extremely beneficial for entrepreneurs. This is because not all businesses have the same cash flow patterns or even the capital availability. As such, you would need a customised plan to ensure that repayment never becomes a burden.
Thankfully, modern lenders extend this benefit with most personal loans. As such, you can evaluate the finances of your business and opt for a suitable repayment plan. It is essential to remember that missing out on your EMI payments or defaulting on your loan can severely impact your business’ financial health.
Consequences of defaulting include interest penalties, which add on to the outstanding amount every month. As such, the interest outgo skyrockets, and this has several implications. For one, it will cut into the business’ profits, and it can also lead to liquidity issues. This is why it is important to have the right tenure.
3. Simple Application for Quick Turnaround Timelines
The personal loan application process generally includes a few straightforward steps. To qualify, you need to only meet the basic criteria and submit minimal paperwork. This is unlike certain business-related loans, which require a long list of documents.
Moreover, technological advancements have enabled lenders to offer you the option of a fully digital loan. To get a personal loan apply online, submit your supporting documents, and complete the KYC requirements online. After completing your application process, your funds get sanctioned within 24 hours.
This online application process and quick access to funds allows you to secure time-sensitive business opportunities without any compromises. This could mean purchasing new machinery on discount, securing inventory, and more.
4. Ample Sanction for Most Business Expenses
Yet another essential benefit of availing a personal loan for your business is the substantial loan amount that you can access. This high loan amount can help you cover your business requirements, such as:
- Expanding your business operations
- Purchasing new equipment for your business
- Hiring new talent
- Replenishing inventory
- Bolstering working capital
When you get a loan from a lender, you can also have access to a top-up loan facility that provides you access to additional funds on top of your current loan. You can get this facility on the personal loan that you take for your business.
You can check the personal loan eligibility and the application process with your personal loan lender.
5. Safeguard your Business Assets with No Requirement for Collateral
Most lenders will require some form of collateral to protect themselves against loan defaults. However, for newer businesses or young entrepreneurs, it may be difficult to pledge assets. Thankfully, personal loans do not have such requirements, as they are unsecured loans.
You don’t need to pledge any collateral to qualify for funding, and this makes it much easier to get funds. Moreover, unsecured loans are quicker to avail as lenders do not have to undertake lengthy steps to verify and evaluate the asset.
Eligibility Criteria for Getting a Personal Loan for Your Business
Here are the eligibility criteria you must meet to get a personal loan for your business:
- You need to be an Indian resident to avail a personal loan
- The minimum age requirement is 21 years
- The minimum monthly net income requirement is ₹15,000
- You are eligible to apply if you are a public or private salaried employee or a self-employed individual
- The minimum work experience requirement is 2-3 years
- The minimum credit score requirement is 750
Documents Required for a Personal Loan for Your Business
Check out the documents that you need to avail a personal loan for your business.
- Proof of Identity: Aadhaar card, PAN card, passport, driver’s licence, Voters ID card
- Proof of Residence: Aadhaar card, PAN card, passport, driver’s licence, Voters ID card, utility bills like telephone bill or electricity bill
- Proof of Income: Salary slips of last 3 months, bank statement of last 3 months
- 2 passport-size photographs
The flexibility you get with a personal loan is excellent for covering the fund requirements of your startup and the needs of a well-established business. Research and compare various personal loan options and choose the one that suits your business needs.
Besides the interest rate, you should also compare the other factors such as the fees and the features on offer. Some lenders offer personal loans with specialised repayment provisions, and these can help you when availing the loan for business expenses.