Finances are a major issue for small-scale investors, and they are desperate to get business startup loans.
People in business who have no assets or private means turn to personal guaranteed loans.
What these businessmen often overlook is that personal guaranteed loans have their setbacks and risks. This is what we will discuss here so that you have a realistic picture in mind when you go for the guaranteed loans.
The Risks of Acquiring Personal Guaranteed Loans
When you acquire personal guaranteed loans, then you should make sure that you check and read the agreement carefully.
Remember if you fail to abide by the terms of the loan, then your financial security may be on a risk-line.
The real problem is that most of you do not know the technicalities of the personal guaranteed loans. A personal guarantee means that if the loan is not paid back as per the terms, then you will be liable rather than the business.
This means that the lender can take possession of the money in your bank, your car and even your house if you fail to pay the loan. The worst part is that your credit scores can also get hit in this situation. If the credit scores get affected, then it may become a problem for you to rebuild your business.
Sometimes failure to pay back on time can lead to court issues. No one wants to end up in the court because the cost is sky high.
This is why the best choice is to review your business plan carefully before you apply for personal guaranteed loans. You need to be 100% sure that your business plan will work, otherwise better drop the personal loan idea.
In some cases the lenders also expect your spouse to sign the guarantee. If your spouse has actively participated in your venture, then it will not be a bad idea to go for collaboration. The important thing is that your spouse should also know the risks related to the personal guarantee to avoid any unpleasant surprises.
If you involve your spouse, then remember you can end up in financial trouble in case you and your partner decide to part ways. This is why you have to evaluate the situation from all perspectives.
Think in A Level-Headed Way and Compare the Pros and Cons
The preferable approach is that you should also openly question the lender about the percentage of theloan that he expects you to guarantee. You can try to negotiate the guarantee. This way you can reduce the percentage of loss in case your venture is not successful.
The smartest approach is that when you decide to consider personal guaranteed loans as a business startup loans option, then you should consult a legal advisor. The legal advisor can give you the best advice keeping into consideration your financial situation. They have a broad vision and experience to guide you.
Remember there is no room for emotions when it comes to starting a venture. This is why always have a backup plan ready to pay back business startup loans.