It is usually not possible to take out a personal loan as an entrepreneur. You do not have a fixed income to which the application can be tested. As a result, the bank runs a greater risk. There are credit providers that provide private loans, but then you have to meet a large number of criteria. Often, however, you have to move to a business loan.
What is a personal loan?
With this type of loan, you will receive an amount into your account in one go. This is useful if, as a private individual, you want to buy a car or want to renovate it at home. You then pay back the loan within the term. The monthly amount consists of a fixed portion of interest and repayment amount. Amounts that have been repaid can not be withdrawn again. Early repayment is also often difficult and credit providers may charge a fine for this.
Personal loan: risks for the bank
A loan application must always meet certain criteria. Income is one of the most important factors in this. It is not just about their height, but also about the type of income. For example, the lender can determine the extent of the risk of granting you a loan as a private individual or entrepreneur. In salaried employment there is more income security than if you are an (independent) entrepreneur. This way the bank knows that you can repay the loan. As an entrepreneur, that certainty is not there, so not every bank will want to provide a private loan. Even getting a business loan can be difficult.
Private loan: the other criteria
In addition to income, there are other standard criteria that the lender looks at when applying for the personal loan:
- The family composition: is there one or are there several incomes? Do you have children? A single person will have lower costs than a family with children.
- The housing costs: do you have a rental or rental home? With a owner-occupied home, the mortgage can be a factor in the approval (or non-approval) of the loan.
- Whether or not a listing at Ferb: a Ferb quotation need not be a problem with a loan application. As long as you can see that everything is being sorted out nicely. However, if you have a payment arrears, you risk a negative Ferb quotation . In that case, a lender will usually reject the application.
Private loan: what should you continue to do as an entrepreneur?
An entrepreneur who applies for a personal loan must meet more requirements than a private individual. In addition to the aforementioned criteria, as an entrepreneur you will also have to provide financial information about the company. The longer the company exists, the more likely your application will be approved. Has the company been active for more than three years? Then you must send the annual figures for those past three years with the application. If you are an entrepreneur for less than three years, then the chance is much smaller that the application will be approved. There are lenders that build in extra security by charging higher interest rates. For example, as an entrepreneur you pay more for a private loan than as a private individual.