There is a big world of loan products out there but chances are when it comes to financing your business, you have only focused on one category that is business loans. Most of the people use business loan because they are still unknown from the benefits of the personal loan.
If you are looking to expand your business, then why shouldn’t you look for a personal loan? The products, criteria, lender, and payment structures of business loans are specially designed with business owners in mind. They were made to fit.
But you don’t want to take it for granted that business loans are the only loan products that can help your company succeed. It is possible to find funding that fulfills your particular needs where a business loan might fail, or only come through halfway.
For example, have you ever thought about using a personal loan to finance your business instead? What’s the big difference? Before you can decide whether one or the other works better for you, we’ll have to take a closer look at how they function.
- Personal loans are naturally for personal matters. You might be taking one out to pay for
- An appliance
- Home repairs
- Financing an operation
- wedding, or
- Consolidating credit. Such personal loan involves that bank or lender giving money to you, not your business.
- The differences are quite substantial, personal loans typically come in smaller amounts. It doesn’t require collateral and focuses on the individual rather than the business.
- If you’ve got great credit, then you won’t have as much trouble snagging that personal loan, even if you’re planning on starting a business but haven’t done a whit of research yet.
- In case you are looking for a business loan without any business history behind you, you might be facing a tough time.
- Apply for a personal loan.
- Owners of the business must be looking forward to receiving some extra cash
- Because they needed to fix a problem
- Grow in a particular direction, or
- Just have some capital cushion.
- Since the 2008 financial crisis, Big banks tightened the belts and stopped passing credit around as freely. Lending(alternative one) changed the game by recognizing that small business owners with less than excellent credit or revenue were being underserved, and began offering smaller, faster, more expensive loan options.
- That said, business loans still require quite a bit of time and effort to secure.
- Looking at faster qualification periods and less legwork, but still nothing insubstantial if you are comfortable with smaller or shorter-term goals.
- Businesses have so many moving parts and your lender whether the bank or a startup want to feel pretty confident that you’ll be able to pay them back.
Personal loan for small business
Personal loans provide excellent credit and personal financials. What you have to do is to play to your strengths and think how would a lender appraise me as the most likely to pay a loan back on time
Two more quick aspects of personal loans to be aware of
- If you are going for a personal loan at a low-interest rate and using it for your business, you’re intermingling you are business and personal financials.
- It is not an issue for an early-stage business, but you’ll want to keep careful track of the two separately and start building some business credit as soon as you can.
- Some personal loans could come with closing costs. If you apply for an INR. 5,000 loans and there is an INR. 250 closing fee, you’ll only see INR. 4,750 in your account but will pay interest on the original INR. 5,000. That’s standard practice, so don’t let it take you by surprise.