Mini Perm Loans during the Slow Economy

If you need startup capital, you may consider mini perm loans as an alternative financing method. These short-term loans usually only last 3 to 5 years, meaning you will be able to pay them off quickly if your business is successful. Mini perm loans are usually secured, using an asset your business owns as collateral. Securing a loan makes it cheaper for the borrower. With the short time frame and the lower interest rate, mini perm loans have a lot of advantages in a slow economy.

Secure Start up Financing

Getting start up financing is challenging in a recession. Many investors are risk averse, and most lenders will only lend funds to established businesses. As a new business, you will need to put some of your personal assets at risk in order to secure mini perm loans. This means you may need to collateralize your home or car in order to get the loan. Mini perm loans allow you to do this while limiting the risk you are assuming. The risk is limited because the loans are so short. You will be able to recover the title to your collateral very quickly, and then you can move forward with long-term arrangements. 

Avoid Personal Risk in Long-Run

In the long-run, you do not want to be too financially tied to your business. Since you will be filling out the loan application for a mini perm in your own name, using your personal credit score, you will be very tied to this loan. Once your business is profitable, you can pay off that loan and seek to limit your exposure in your next loan. You can limit your exposure by allowing the business plan to stand on its own two feet in the long-term financing options. Because the business has assets, a balance sheet, and has paid off a previous loan, it will be easier for the business to gain financing after the mini perm loan requirements have been fulfilled. 

Benefit from a Stronger Economy

Hopefully, in the three to five years you pay off your mini perm loan, the larger economy will have recovered slightly. When the economy recovers, lenders once again extend low interest, high risk loans. Your new business will be in a good position to benefit from this revival in willingness to fund businesses. You may also find investors are more able to support your project once the economy has picked up steam again. While your mini perm loan had a very high interest rate due to the high risk it involved, your new financing will be much less risky for any bank, lender or investor. When financing is less risky for the lender, the interest rate will be much lower for the borrower. Of course, it is possible the economy will not recover in the time you pay off your mini loan. Nonetheless, your financing will be much easier to arrange once your business has been profitable for a few years.