As any business owner knows, sometimes it can be very difficult to get funding when it’s needed. Many times, they can’t get money from traditional lenders or banks, forcing them to look elsewhere. In some cases, private loans can be the answer, but it’s important to know what they’re all about.
Who Are Private Lenders?
Private loans can be issued by anyone, including a family member, a friend, or an alternative lender. Private loans are easier to qualify for, but you have to know the terms of the loan.
Are There Restrictions?
Before applying for a private loan, you need to know if the lender has any conditions for using the money. Some private loans may be issued provided the money is used for business expenses only. With that in mind, you should be upfront about why you need the money and what you plan to use it for.
Have A Plan
Before taking out any private loans for your business, you’ll want to have a business plan mapped out. The more you can tell a private lender about what your plans are, what you’ll use the money for, and how you intend to pay the loan, the better off you’ll be. Say, for example, that you need startup money to open a business. If you can present a business plan to a lender about how you intend to market, sell, and make money with your product or service, you’ll make a better case for getting a loan.
You’re Looking For a Fresh Start
When you apply for private loans, private lenders tend to take a look at many aspects of your business including your credit score, any outstanding debt you have, how long you’ve been in business, and what your annual revenue is. Even if you’ve had a previous bankruptcy, you can present a case that a loan will give your business a fresh start. Again, this is where a well-thought-out business plan comes in handy.
Don’t Be Afraid to Ask
In 2017, only around 40% of business owners applied for a loan, a decrease from 45% in 2016. If you are a business owner and find yourself in need of money, don’t be afraid to ask about private loans. Some of them have no minimum credit score requirement, so the best thing you can do is apply.