Soft loans are another source of finance when starting up a business. I would always advise people to first try and obtain a grant but if your business has a large amount of start up costs then a soft loan may be unavoidable.
For any disabled entrepreneur taking on a loan should not be done lightly and careful consideration should be given to the interest, the size of the repayments and the overall cost.
Soft loans are usually offered to disabled entrepreneurs by national and regional organisations like the Prince’s Trust and charities who work with the visually impaired, deaf, those in wheelchairs etc.
A soft loan is like any other loan, such as a personal loan or a business loan offered to a person with a disability. Basically you borrow an amount of money to eventually pay back, in regular payments, plus interest. The main differences between a soft loan and a regular loan are;-
1. Soft loans tend to come at a lower rate of interest than your standard business or personal loan. On some soft loans rates are even at 0%, but often there is an administration fee.
2. There is usually a holiday period from when the loan hits your bank account to when you have to start your first payments. This can be up to 6 months.
3. Sometimes organisations supporting the disabled entrepreneur will offer holiday periods if the person gets into trouble paying back the loan. This can be useful to a person with disabilities if their business is on a downturn or illness is dictating how many hours they are working.
4. The biggest advantage of a soft loan is in some circumstances if the business stops because of ill health or lack of business, it can be possible for the debt to be written off by the organisation who granted it. This would be at their discretion and the person with the disability would have to show that they have really tried to make the business a success.
The other thing to remember when being granted a loan is to include the repayments into your business plan and cash flow. This way you will be able to see if you can really afford it.