If you are thinking about starting a business or already own your own business, you may have considered taking out a loan at some point. Having extra cash can greatly help a business and change the course of the business itself. A personal loan is a perfect way to get the cash you need and help your business succeed. Here is how.
Business Loan vs. Personal Loan
At first glance, a business loan and a personal loan may look the same. You can get both types of loans from banks, lenders and credit unions. Both have similar fees and interest rates. However, they do have a few differences. Business loans are intended to be used strictly for business purposes. Lenders may require proof that the money from the loan is being used solely for business functions. This can be restricting and difficult to prove. Personal loans, on the other hand, can be used however you see fit, requiring little paperwork or proof of use. This flexibility in spending can be very beneficial especially when you are starting a business and may need funds for things such as your own personal rent or to help you pay bills while you start up your company.
Better Eligibility
If you are starting a new business from scratch, you may not meet all the criteria to apply for a business loan. In fact, banks approve a very small percentage of business loan applications. A personal loan may be easier to obtain. If you have good credit and a solid financial history, a personal loan should be simple to get and then you can use the money to open your business.
If you own a business and it is struggling, a personal loan may be easier to get as well. Lenders will only look at your personal financial standing, apart from your business. So, if you have good personal credit, a personal loan will be obtainable and then you can transfer those fund to help your business.
When You Need a Small Loan
Personal loans come in all shapes and sizes. You can get a personal loan or just a few thousand dollars or even a hundred thousand dollars. However, business loans typically require you to take out a minimum of $25,000 which you may not need. You don’t want to take out to large of a loan and risk not being able to make the monthly payments! When you just need a small amount of cash to help your business, opt for a personal loan.
No Collateral
Many loans that are geared specifically toward businesses require collateral. This means you will only be approved if you are able to offer the lender something in equivalent to the amount of the loan, whether it be your 401K or your home. Personal loans don’t often require any collateral at all but solely rely on your credit history and financial standing. This can be a safer way to finance your business as you don’t risk losing your life savings or your home.
As you can see, a personal loan is a great way to help finance your business. With all the loan options out there, you are sure to find a personal loan that fits you the best and will get your business running smoothly!
