With the average small business now paying around $75,000 a year for digital marketing, it’s clear that there are some serious costs to a digital presence. If you’re considering personal business loans for your website, you need to think about how that’s going to help your site. Once your site is up and running, you still need to promote.
Here are four things you need to know about getting a personal loan to start your e-commerce website.
1. Use it Because It’s Easier To Qualify
When you’re looking at taking out a personal loan for your business expenses, you’re going to experience some added benefits. One of the biggest reasons to pay for your website with a personal loan is that it’s so much easier to qualify for one.
If you’re running a new company, you don’t have a whole lot of equity lying around. Business lenders don’t know whether or not your business model is going to provide a return because there’s not a lot to compare it against. You’re going to struggle to find a business lender who’s willing to work with you to fund just your website.
If a lender can just look at your credit history and your income instead, they won’t have to go through the hassle of looking at your business’s finances. You won’t need to dig up all of the paperwork necessary for you to get a business loan. The elements necessary for you to get a personal loan are all at hand.
Since so much about a personal loan is up to the discretion of the lender, they might not see the point of lending to you just for the sake of a website. If they’ve got a backward business model, that’s going to impact your ability to get what you’re looking for from them.
2. Get Started ASAP
In a lot of e-commerce businesses, it’s vital to strike while the iron is hot. Often there’s a trending market that you need to invest in right now rather than waiting a few weeks to get the money you’re looking for.
When you go through a lender like the SBA or Small Business Administration, you get lots of added benefits, but you get that money several weeks later. If you’re sitting on inventory that’s only becoming less valuable by the day, you need to get that inventory out there to your customers. With a small business loan, that stock is getting less valuable by the minute.
Personal lenders get money out to you ASAP. You need the funds distributed quickly if you want to stay ahead of your competition.
In just a few days, you’ll have the money you need to get your website up and running. Since most reputable web designers want around 50% of the funds up front, you won’t be able to get things started until you get at least that much. Take out slightly more to pay for incidentals in the interim.
3. Protect your Personal Credit
One thing about taking out a personal loan for a small business expense is that you put your own personal credit on the line. If you’re the owner of a business and the business goes under, the business can go bankrupt without dragging you down with it. However, with a personal loan out in your name, you’re going to be liable for whatever happens.
If your business fails or even if you just fall behind in your payments, you’ll end up incurring some nasty marks on your credit report. When you have a low score or become notorious for missing your payment due dates, you’ll have trouble getting other types of credit you need. If you need to buy a house or a car, you’re going to struggle to keep your credit above board.
When you take out a personal loan to pay for a business expense, put a plan together on how you’re going to repay your loan. Have everything mapped out in advance so that you know how to pay things back step by step. Without a plan ahead of you, you’re going to struggle to protect your personal credit and ensure that you have a financial future, regardless of your business.
Check out this helpful article on taking out personal loans.
4. Don’t Do it If It’s Not Enough
Your lender is going to put a cap on your personal loan. If you need more than just a simple website to get up and running, think about what you really need in the future.
When you apply for a loan from the SBA, you’re looking at a cap around $5 million. With a personal loan, you’re looking at something much closer to around $100,000. This might get your business by for a month or two but it’s not enough to help you grow or do more than just scraping by.
If this loan is for more than just a website, don’t even bother.
Consider your interest rates as well. If you can’t just pay back this loan in a few months, you’re going to be paying off interest for years to come.
SBA loans and other types of business loans are larger but meant to help businesses succeed. They offer more competitive interest rates that help businesses keep the lights on. Don’t just get a loan for the sake of it if you don’t think this is going to be enough to help you get by.
Personal Business Loans Can Help You Get By
While personal business loans are a way to bridge the gap while you’re trying to get to the next level in your business, don’t rely on them 100% of the time. You need to have steady revenue that’s able to be paid off rather than relying on just personal loans to build your brand.
If you’re accompanying your website with a blog, check out our guide for how it should be created.