Buisness or Personel Loans Which?

catmoomoo

I'm looking to set up an small buisness, that would require £12,000, to get up and running. Can anyone advice at to what is the best option for this funding?

Would it be a Business or a Personel Loan, and who would be the best people/ bank to approach.

Thanks

Debt_Free_Chick

I assume that you will operate as a sole trader i.e. not set up a limited company. If so, then it really makes no difference as you it will be a personal debt, either way.

However, any lender is likely to want to see a Business Plan if you reveal that you want the loan to fund a business start up. They will want to see that the new business is likely to generate sufficient income to service the repayments. And you should be sure of this too ... do you have a business plan? Remember that you will have to pay interest in addition to the £12,000 you borrow. So you need to be clear that the business will provide the income you want as a salary, meet the loan repayments and meet any other operating costs (overheads). The business plan should also indicate for how long you need the loan.

You could consider taking out a personal loan, but it's likely that you will have to lie about the purpose of the loan so that wouldn't be a great basis on which to have a relationship with an organisation to whom you owe money. It's likely to consitute a fraud so you ought to be truthful.

Do you really need a loan? Have you tried for any business start up grants? Have you really researched this fully?

Sorry - don't mean to sound rude, but it's difficult to tell from your post where you are.

Perhaps some more information and clarification re the business plan would elicit more helpful replies.

catmoomoo

I've started to place together a business plan and undertaking market research which has started to show that an income of approx £5000 per annum (Net) would be easily reach. The business will be run along side my current employment so, I would not require a salary as such.


The 12K required will be used to purchase all the necessary equipment and materials. So the income generated would be solely used to pay off the amount borrowed. The equipment (if need be) could be easily re sold.

Robert_Sterling_3

You could consider taking out a personal loan, but it's likely that you will have to lie about the purpose of the loan so that wouldn't be a great basis on which to have a relationship with an organisation to whom you owe money. It's likely to consitute a fraud so you ought to be truthful.

I suppose another thing you could consider is shoplifting if lying and fraud are going to be considered.

On the other hand could you increase the amount of your house mortgage?

Debt_Free_Chick

I suppose another thing you could consider is shoplifting if lying and fraud are going to be considered.

On the other hand could you increase the amount of your house mortgage?

This is worthy of consideration, but you should be aware that - if you borrow against your property - then you could lose your property, if your new business fails.

Think very carefully about this option.

Jeppo

Catmoomoo, I was in a similar situation to you a couple of years ago. Technically 'personal' loans should not be for business purposes, yet I don't see the problem if you are a sole trader anyway. The category to tick for loan purpose would be 'other'. Also as you are buying stuff that can be sold if things don't work out & not relying solely on business to pay back the loan - just yet - I wouldn't worry about it. People can get so obsessive about T&Cs!

In my case I bought a load of recording gear using a Cahoot flexible Loan & Credit Cards at 0%. When the BT deals ran out I consolidated everything on to an Egg Loan at 6.9% APR. On the phone I even told Egg that most of the money was to consolidate business debt! At the time I didn't even know that I wasn't supposed to use a loan for business purposes. They must have been desperate for my business because, technically, they should have said 'no', but of course they turned a deaf ear.

Anyway the good news is my part time business is bringing in a tidy sum each month (& paying off the loan) & I still have my day job to fall back on.