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5 Ways to Get Personal Loans for A Business Startup

5 Ways to Get Personal Loans for A Business Startup

There are several sources which can offer finances for your new business. You can take help from banks, credit cards or commercial lenders. A lender can give you expert advice in determining the type of loans and finances you need for your new business. Before deciding on a method of receiving the loan, it is important that are aware of the nature of different loans.

Here are some of the structured loans and the common variations.

1. Line-of-Credit:

It is one of the most beneficial types of loans for new businesses. It is one of the permanent arrangement of loans that every business should have because it helps in protecting your company from any delayed flow of cash or emergencies.

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These loans are for purchasing the real estate and different types of equipment. It is for short term and assists in extending the available cash in the checking account of the business to the maximum edge of the contract of loan. Every bank has a unique funding method, but some money is shifted in the checking account so that cover checks are included. The business also pays interest on the advanced amount until it is paid back.

They have lowest interest rates because they are seen as low-risk loans. Individual banks add a section that allows them to call off the loan if the company is in some trouble. You pay the interest payments every month while the principal payment is made when it is convenient for you. It is better to deliver the payments often. Most of these loans are for just a year, and they can be renewed automatically by paying annual fees.

2. Installment Loans:

You pay these loans back in monthly installments which are equal. The payment covers the interest and the principal amount. These loans are written so that all the business needs are met. After signing the contract, you will receive full payment, and then you calculate the interest from the day you receive the loan to the last day of it. If you can repay the installment before the final date, there can be a suitable modification of interest.

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It is an excellent loan option for startups as the loan is known as a business cycle. It is a four-month loan paid in installments, and it carries low-interest rates because of low risk. You can pay installments yearly, after half the year or quarterly.

3. Balloon Loans:

Balloon loans are mostly reserved for businesses which have to wait for a specific date before receiving payment from the clients.

These loans are primarily given under a different name, and you can recognize them by as the total payment is received when you sign the contract. The interest is only paid as long the loan is alive. They are pretty similar to the loans paid in installments.

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4. Interim Loans:

These loans are for business owners who can repay the loan, and their guarantee is dependable.

In these loans, periodic payments are made to the contractors looking for building new facilities and the mortgage of the building can be used for paying off the loan.

5. Secured Loans and Unsecured:

There are two forms of loans: unsecured and secured.  If the lender is a good acquaintance of yours and believes that your new business is comprehensive and knows that you will pay the loan on time, then the lender can give an unsecured loan. It is a loan in which there is no insurance pledge in case you fail to repay the loan. The lenders will only agree to this loan if they consider you a low risk. These are the best personal loan lenders, but as a startup, it is not easy to get an unsecured loan because you need to have a successful track record.

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A secure one requires some collateral, and it mostly has a lower and more affordable interest rate as compared to the unsecured ones. It often uses property or the inventory as collateral. It is estimated to last longer than the loan and is often connected to the reason of loan. The lenders value the insurance appropriately as this is supposed to repay the loan if it defaults.

Featured photo credit: ALTMAN BAIL BONDS via altmanbail.com

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Last Updated on March 4, 2019

How to Use Credit Cards While Staying Out of Debt

How to Use Credit Cards While Staying Out of Debt

Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

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Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

Do Not Treat Credit Cards as Your Funding Sources

Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

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I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

Make Sure to Always Pay Off Balances in Full Each Month

The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

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Using Credit Cards with Rewards

Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

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So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

Featured photo credit: Artem Bali via unsplash.com

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