Non-Real Estate Loans Private Lenders
Non-real estate loans from private lenders is not as hard of a proposition as one might think. But are they worth the high interest rate? Typically a private loan made for non-real estate purposes will cost you more in the short term than a traditional loan. The advantages of a private loan for non-real estate deals is that they often take less time to approve and the terms are generally more flexible. By nature private lenders take on a lot of risk, but don't be fooled into thinking that they do so unknowingly or without reservation. Assurances, a good track record and often some equity will be needed to get one of these "quickie" loans.
The terms of a private loan are not regulated by any government institution. This is good and bad for you, the borrower. It is good because there is definitely more flexibility from the loaner. The bad part is the outrageous interest rates and often aggressive payment terms of the loaning individual or institution.
Another advantage to obtaining one of these expensive loans is simply the one on one consideration you would receive. A bank will most often run a credit check and base their loan to you on your credit score regardless of your proposed business dealing with them or what you are getting a loan on. For example, if you were to apply for a loan for a new automobile. If the price you negotiated for the car was actually at or just below the bluebook value of the vehicle, but you had bad credit a bank would still deny you the loan- even if the car was more than enough collateral. A private lender would possibly be more forgiving. Of course the downside to the private lender in this case is that most private lenders do not report to credit bureaus, so your diligent payments will not build a credit history with anyone but the private lender.
Securing that first loan from a private lender for a business is an option as well. This often requires a solid business plan though and the realization, once again, that the loan has to be paid off in a short term. A strong business plan helps establish your credibility and allows the lender the opportunity to get a look at you as a potential investment as well as your business. Private lenders are more apt to loan money for real estate ventures or redo homes. But for business, there is a bit of a challenge involved.
Often some sort of equity will be asked for when seeking a loan from a private lender. This could be anything from an automobile to stocks or homes and other property. All of this really depends on the lender and your history with a lender. Once a good history has been established between the borrower and the lender, the private individual or institution is more willing to take higher risks and loan more money. Again though, the downside to the whole process is there is no real credit built for the borrower. This can be a bit of a trap to the consumer when you consider that bad credit or lack of credit is what led to the need for this type of loan to begin with.