Should you apply for a personal loan to fund your business? Or should you go for a business loan instead? This is actually a very common debate that goes on these days. Personal loans are unsecured loans which do not need any collateral to be submitted. Business loans are secured loans which need collateral or other security. Business loans are given to owners of businesses and companies with a good credit history while personal loans are for people who have a regular monthly income and good credit scores.
Personal loan applications get approval based on parameters like the credit score, monthly income and nature of employment. Business loans are approved after ascertaining the reputation of the organization, credit history and profit and loss statements. Business loans come with terms and conditions in most cases while personal loans can be used for almost any purpose.
In some cases, personal loans can be good options for a business. This is when you are just starting out and require capital. In the early days, getting a business loan may be next to impossible. Personal loans can help in funding smaller business ventures. In case you have a smaller amount to borrow, you can go for a short-term personal loan which is more convenient than a business loan for a longer duration. Most applications for business loans get rejection on account of limited collateral put up by the customer. Instead of putting up your home or other assets as security, you can opt for personal loans which do not require any such collateral.
Also, personal loans are often pre-approved and come with minimal paperwork, swift processing and fast disbursal. Business loans require a lengthy procedure with lots of documentation. Several financial institutions are now offering instant approvals and 2-3 day disbursal for personal loans. The procedure of getting a business loan approved is extremely time-consuming and this may hinder your expansion or consolidation efforts. Personal loans are good options for people without the financial backup and business history required for getting a business loan approved.