Transferring a personal loan into a business one can be very challenging. If you have applied for a personal loan for your business, you could be concerned that your finances and assets will be taken away if you were to go bankrupt or your business should fail otherwise. A lot of people start looking into transferring these personal loans into business ones as a result. This way, the business will bear the responsibility, and you will get to keep your assets. It is not impossible to make this transfer, but the paperwork thereof will be difficult to manage. Before you can carry out the transfer, you might be charged a number of legal fees.
The first step is to set the business up as a legal entity on its own, if you have not done so. In the case of sole proprietorships, there is no difference between you and your business in the legal sense. This way, you will have to pay back the loan even if you manage to complete the transfer. On the other hand, setting up a limited liability corporation (LLC) is a way to find a nice loophole. With a limited liability corporation, the business becomes a separate entity. The corporation has the right to secure credit, operate bank accounts, own land, and employ other people. To set up a LLC, you must file the respective documents. Actually, a lawyer must do this for you, as it is rather complex. What you should know is that in Canada, there are different
The next step is finding proof of business income. If you are applying for a loan on behalf of your business from a bank or another financial institution, the latter must see proof that you have the means of paying it back. After that, you must apply for a business loan. This can be done through a credit union, a bank or a small business association. You'll have to give proof of business income, use the business name, and fill out the application, listing the corporate ID number if the loan is to be taken out on behalf of the business entirely and not you. You may be asked to show your business plan as well, together with your company’s credit report. Naturally, missing information and disorganized paperwork increase the processing time and may even result in your application being rejected.
The next step is finalizing the business loan. This includes signing papers and paying certain fees and other costs depending on the specific situation. These usually involve what is known as loan origination fees. The origination fee, also called an activation fee, represents a form of payment to establish an account with a company, broker, or bank, which handles the processing related to granting loans.
Finally, the profits from the business loan are used to cover the personal loan. This is the way the personal loan is paid off. The transaction is complete, and the debt is transferred to a business loan.