While the principles which are applied to business loan and personal loan are the same, but there are many differences between business and personal loans, some of which you might not be aware of. The article below helps to tell us the difference between the two.
Personal loans are those which are given to the individuals and not businesses.
A business loan is a loan which is specifically intended for the business purposes. There are a number of the different types of business loan, which are suited to the requirements of different types of business such as the bank loans, mezzanine financing, the asset-based financing and also invoice financing.
Personal loans that are related to most of the people are of smaller value. The bank only intends to assess the ability to make the repayments which are set out in the loan’s terms and conditions. This can thus be an advantage or a disadvantage depending on the personal circumstances.
Business loans can typically be of much higher value than personal loans unless the borrower takes out a sizeable mortgage. While some of the small business loans at the lower value end and are similar in many ways.
The process for a business loan from a bank is thus quite a long and detailed process with an extensive application as and when they are compared with personal loans.
While the credit report, the tax returns, and pay stubs are the only documents which are necessary for a personal loan, it is however also necessary to bring a financial statement for the past three years in addition to the other documents to get a business loan.
The vast majority of business loans do not require a guarantor in order to approve an ability of a client to repay the credit.
Though in case the business takes out a loan, its owner thus signs the loan and serves its guarantor.
With a personal loan, once the money has thus been delivered, there’s generally no further follow-up by the bank as long as the payments are made as they are agreed upon.