With approximately 28 million small businesses in the United States, it’s easy to see that the American dream is alive and well.
Millennials, in particular, are interested in owning a small business. There are 75 million millennials in the United States and members of this generation have a “be my own boss” mentality. According to America’s SBDC for the Center for Generational Kinetics, “61 percent of millennials say there is more job security in owning your own business than in working for someone else.” This 2017 study also pointed out that 49 percent of millennials intend to launch a company within the next three years.
But can you use a personal loan for business? Yes, you can.
If you’re starting a business, you may already expect expenses such as inventory, office equipment, office space and advertising but there are other hurdles to consider.
The Challenges of Starting a Business
Only 20 percent of new businesses survive past the first year. Despite this, entrepreneurs take great pride in the challenges of starting a small business and are often willing to take the risk. Some of the roadblocks they face include:
- Hiring top talent. Some millennials hire other millennials, as they’re more likely to share the same vision for the future. Others, however, realize the importance of bringing the older generation into their company, as these professionals have more real world experience and knowledge. Having a good understanding of the industry and roles you need to fill may better help you identify the right mix for hiring.
- Spreading brand awareness in a crowded market. Overall, many would agree that it’s good for the country to experience a growth in the number of new small businesses. Conversely, it poses a challenge for entrepreneurs, as they’re faced with mounting competition.
- Acquiring funding. Many entrepreneurs struggle with finding the money they need to get their business off the ground with the average cost to start a business, which has been reported at approximately $30,000.
- Finding a way to give back. It matters to millennials if American businesses give back to society, maybe even more than it does to gen Xers or baby boomers. It’s one thing to say you want to give back, but another thing to find a way to do so. This can be a big challenge for millennial business owners.
How a Discover Personal Loan Helped a Small Business in New York
If there are business expenses you don’t currently have the capital for but could ultimately help the company grow, a personal business loan could be a viable solution.
Take, for example, the Campbell Cheese Shop in Brooklyn, New York, which was opened by two sisters using a personal loan from Discover.
Is It Better To Get a Personal Loan or a Business Loan?
The moment you realize you need cash for your business, your mind may turn to a small business loan. After all, this type of loan is designed for companies just like yours.
There are times when a small business loan makes the most sense – such as if you need to borrow hundreds of thousands of dollars, but it may not make sense if that’s more than your small business needs.
The biggest problem with a small business loan is the strict requirements. Not only does this hold true with the eligibility requirements, but it also comes into play during the application process. Here are some of the biggest challenges:
- Lengthy application process that can eat up hours of valuable time
- Documentation requirements, such as providing a business plan, tax returns, references and financial data
- It can take a long time to receive the funds (even after you get an approval), as the entire process can take up to 90 days.
- There are as many as seven types of small business loans, so just choosing the right one for you could take some time.
Although it’s common to initially assume that a small business loan is the best choice, you may find that these requirements are difficult to meet or will take longer than you want to get your business moving.
Is a Personal Loan Application Process Any Better?
The short answer is that with Discover Personal Loans you can get a same-day decision in most cases.
With a personal loan, you don’t have to jump through nearly as many hoops. Instead, it’s much easier to acquire a loan in a timely manner (and without all the hassles mentioned above).
Some of the primary benefits of a personal loan for business use – especially when compared to a small business loan – include:
- Simplified application process that can be started online or over the phone within a matter of minutes
- Fewer documentation requirements (i.e. a business plan)
- Same-day decision in most cases
- Fewer complications, with the main decisions being the repayment schedule and amount to borrow
The simplicity and convenience alone is reason enough to learn more about using a personal loan for your business.
How to Make a Final Decision
Now that you understand that you can use a personal loan for business, you need to decide if this is right for your company at the present time. As you compare this option to a small business loan, ask and answer the following questions:
- How do you plan on using the funds?
- Do you need the money immediately, or can you afford to wait?
- How much money do you need to borrow right now?
- Have you collected all the information you need for the application?
- Which type of loan is most affordable over the long run?
By answering these questions, while also consulting with a lender for each type of loan, you’ll find yourself in position to make an informed and confident decision.
It’s a myth that you can’t use a personal loan for your business. Despite the name, you can use the funds for a variety of business expenses. Also, there are several lenders out there but getting a personal loan from a bank can be a smart choice.
Your first instinct may be to apply for and secure a small business loan, but you should know you have other, potentially simpler options. You may find that the benefits and convenience of a personal loan make it the right choice for your company.