Should you get a personal loan for your small business?

Did you know that you can use a personal loan to start a business? A personal loan is a type of installment loan that you can use for many purposes, including funding to start a small business.

A personal loan is an accessible way for aspiring entrepreneurs to get capital to turn their brilliant business ideas into reality and get their businesses off the ground with smooth cash flow. Find out how a personal loan can help your business thrive.

The role of cash flow and personal loans for small businesses

When you start a business, it is important to manage cash flow. Cash flow is the money that comes in and out of a business. Money flows into a business through sales revenues or other forms of income, which then flows out when they spend on operational expenses.

Cash flow is necessary for starting and maintaining a business. You need to invest money, no matter how small, to start a business so you have funds to produce products or pay for your business’s utilities.

Once they open shop, it is crucial for business owners to learn how to manage business cash flow because it helps them assess if they have enough funds to cover the costs of operations, labor, rent, and inventory. Tracking cash flow helps avoid overspending and keeps the business afloat.

By tracking cash flow, business owners can assess if they will need to apply for a loan to cushion the operations or fund product development or expansion plans. This way, they can have ample time to acquire extra funds when needed such as by applying for a personal loan.

A personal loan can serve as an alternative to business loans, which may require collateral and an extensive application process. It’s a feasible source of capital or extra fund for entrepreneurs who may need help to sustain their business’s cash flow.

Why are loans important for small businesses?

Owners of micro and small businesses (MSEs) typically have limited resources and a smaller reach, making it challenging to stay afloat without additional financial help. Furthermore, it is difficult for micro businesses to get business loans. This is why many micro and small businesses rely on personal loans instead to help them sustain their operations or expansion. Check out how loans can help small businesses:

Raise capital

Entrepreneurs need capital to start any type of business. Often, people use their savings to jumpstart a business, which is challenging. Some businesses, like franchising may need higher capital, which may take longer to save up for. A personal loan can help small business owners raise capital faster.

Compared with business loans, personal loans have fewer requirements and don’t need collateral so it’s easier to apply for. Personal loans are also more flexible, so you can use the loaned amount for different things your business needs.

Aid in cash flow management

MSEs that are just starting up may have early struggles with cash flow management. They may do well one week then struggle on the next. A personal loan can help support their daily operations, such as purchasing supplies and inventory and operational expenses.

This type of loan also works well as a cash injection for MSEs since you can borrow PHP 20,000 or up to PHP 2 million. So, you don’t need to borrow more than you really need. As a result, it’s more effective as a temporary aid that you can pay back easily.

Franchise a business

Franchising is a lucrative business that lets you ride on already-established brands and products. However, this type of business requires high capital and may take a while to become profitable.

If you’re entering a franchise business, it’s important to be prepared to fund the business for one to two years before you start seeing profits. A personal loan can help you fund the franchise or sustain the business so not all capital comes from your pocket. In this way, you can pay your loan with the profit from the franchise.

Manage repayment easily

Business owners can use personal loans for different needs of their business. A personal loan offers flexible payment terms and lower interest rates in addition to being multi-purpose, so entrepreneurs don’t need to take out different loans for various purposes. It makes repayment more manageable for borrowers.

With just one loan to manage, borrowers can manage their cash flow better and thus keep their business up and running. The importance of loans in empowering small businesses in the Philippines is undeniable. It helps encourage more MSEs by providing an accessible source of funding, thus reducing financial risks.

MSEs can use part of their revenues to cover the payment for their personal loan and still have enough for your daily requirements. No need to dip into your personal savings to help pay for your loan. As your business continues to generate profits, you can simply let your business pay for the loans.

Need funds for your small business?

We have discussed the role of cash flow, the importance of loans in businesses in the Philippines, and how they allow people to turn their ideas into real businesses that can expand.

Metrobank offers fast-approved personal loans that entrepreneurs can tap to start, support, or expand an existing business. With lower interest rates and flexible payment terms, you can propel your business to the next level.

Do you need capital for your business? Apply for a personal loan for your micro and small businesses today.