How to Transfer Personal Loans into Business Loans
When you take a loan from someone, you have to put something in collateral to justify your repayment. Therefore, if you have taken a loan on personal terms from someone with intent to use it for business, there is a huge danger of losing your personal assets that are marked as collateral against the loan, even though you didn’t use it for personal purposes. Hence, it is better to convert the personal loan into a business loan to avoid any loss of personal property in case you are unable to pay back the loan installments in time. The conversion process might sound a bit hectic and difficult to understand but simple step-by-step procedure can help you get rid of all the tensions that can damage your business’s overall progress as well.
Instructions
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1
First thing you need to do is to register your business as a separate entity. It means you will have to register your firm with the regulatory authorities and define it as a separate different entity altogether. Hence, any loan that would be taken on the name of the business will not be liable upon you to be repaid via sale/auction of personal assets. There are several methods to register a firm. You can choose between private limited company or public limited company. If you want others to invest in your business than you should register it as public otherwise you can keep the business to your family by registering it as private.
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2
The loan will be provided to you on the progress of your business now. So, you have to make sure that you are able to show proof of the business income that is good enough to lure the lender is giving you the loan. Your business should have assets to back up the cost of loan in case you fail to repay the amount of loan at its maturity, business assets will be auctioned by the financial institution to recover the figure.
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3
Prepare documents required to acquire a business loan. Hire a professional to do that for you. Don’t panic and just stay calm because documentation can be a hectic process and people usually panic a lot that reduces the chances of satisfying the lender. Use the business name, income figures and cash flows to present the data to the potential lender.
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4
Close the deal with the lender. Use the loan acquired to pay off the personal loan and your tension will be over.
