One of the biggest challenges to starting a small business is finding the funding to do so. According to recent reports, over half of new businesses have trouble with credit availability or accessing funds for expansion. If you own a new or small business, what can you do to obtain a loan without a substantial business history? Obtaining a personal business loan may be the option for you.
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What is a personal business loan?
As the name suggests, a personal business loan is a personal loan used for business purposes, including inventory purchases, payroll, or marketing initiatives. For new or small businesses, personal business loans may be the ideal route for funding because it can be difficult to obtain a loan with little to no operating history. With no established track record to refer to, approval for a personal business loan is based on your personal financial history instead.
Personal business loans can be obtained through banks, credit unions, and online lenders. They are often offered as term loans, which means you may borrow a lump sum upfront and are required to repay a specified amount at regular intervals over a set period of time. Personal business loans are often repaid in monthly installments.
As a small business owner, it is important not to mistake a personal business loan with a standard personal loan. Carefully review the terms of your contract, which will indicate whether the funds can be used for business purposes.
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How do I get a personal business loan?
As the name suggests, a personal business loan is a personal loan used for business purposes, including inventory purchases, payroll, or marketing initiatives. For new or small businesses, personal business loans may be the ideal route for funding because it can be difficult to obtain a loan with little to no operating history. With no established track record to refer to, approval for a personal business loan is based on your personal financial history instead.
Personal business loans can be obtained through banks, credit unions, and online lenders. They are often offered as term loans, which means you may borrow a lump sum upfront and are required to repay a specified amount at regular intervals over a set period of time. Personal business loans are often repaid in monthly installments.
Expert Commentary
AdvisorSmith spoke with the following experts to provide critical insight on cyber insurance for business owners.
Bruce deGrazia
- Program Chair for Cybersecurity Management and Policy
- University of Maryland Global Campus
Dr. Shiu-Kai Chin
- Professor of Electrical Engineering & Computer Science
- Syracuse University
Aniruddha Pangarkar
- Assistant Professor of Marketing
- University of Wisconsin-Green Bay
More Experts
Q. Should small businesses be concerned about cyber risk?
Bruce: Absolutely. In fact, small businesses are a more likely target than a Fortune 500 company. Hackers know that the large companies have a staff of IT people dedicated to protecting the organization’s network. They also have CISOs and risk management people on staff. Small businesses have none of these things, but still have assets worth taking.
Shiu-Kai: Yes. Cyber risk involves more than information. It includes the control of funds and information, i.e., the command and control of your business operations. If you lose control, your business operations will stop. Just look at the recent collapse of Colonial Pipeline operations.
Q. Where do you see the cyber insurance market trending, and what are the main insurability challenges?
Bruce: In my opinion, the cyber insurance market will increase. More companies are trying to transfer their risk and the best way to do that is by purchasing insurance. The main cyber insurance challenge is to determine what risks are covered by the policy.
Shiu-Kai: The challenges organizations and people have is adequately estimating cyber risk, i.e., how well a system is conceived, designed, implemented, operated, and monitored to assure mission-essential functions are available with safety, integrity, and security. Many risk methods are based on guesses in the form of probabilities of likelihood. The [research] by Romanosky, Ablon, Kuehn, and Jones of RAND have a devastating and amusing summary of the situation, after they reviewed cyber insurance policies: carriers don’t know to price cyber risk. The research we are doing with DoD, NSF, and relevant Defense Corporations applied directly to mission assurance, risk management, and certification of trustworthy systems.
Q. How can a business effectively organize and manage cyber risk?
Shiu-Kai: Mitigating cyber risk is much like mitigating risk in your financial operations. Just like you think about who touches or has access to your money and why, think about who touches and has access to your computer-based operations and why.
Think about the controls on your essential computer-based operations, transactions, command-control-and-communications (C3). Answer the question, “What controls are in place to assure that only those who are authenticated and authorized actually get to execute or deny those C3 operations?” If you think about authenticating and authorizing C3 operations as if those operations were money, you’ll be on the right track.
Bruce: Every business, regardless of size, should have a risk assessment done. Also, although they don’t need to employ a cybersecurity specialist full-time, they all should have one on retainer.
Final Word
Obtaining funding for your business can be difficult—especially if you are beginning a new or small business. It is important to consider all of your options, but without a history of operations, many traditional business loans will be unobtainable. A personal business loan can assist you in your endeavors by focusing on your personal financial history. Although you carry a larger personal risk, if you are able to make your monthly payments on time, a personal business loan may be exactly what you need to obtain the funds to kickstart your business.
