Nowadays, loans are pretty easy to access. However, people are more familiar with business loans and personal loans. business loan, as the name suggests, can be used for expanding the business and also the activities related to business. As per www.business.com, there are short-term and long-term loans. If you are concentrating on the expansion of the business, then you can take a small business loan. However, have you thought of using the personal loan to help you in your business? Let us see what happens when a personal loan is used for a business purpose.
Business loans are those which are used by business people as financial support when they want to expand the business. It could be any reason related to business. It could be for buying machinery, expanding the office or for generating some extra working capital etc. Business loan takes a lot of effort as well as time to secure. You cannot get the business loan in one day. It will take weeks for the banks to check the application and the credit score of the company before they sanction the loan. Short-term loans are available if you are looking for the sanction to be approved quickly.
Personal loans on the other hand, as the name suggests is for personal matters. It could be for buying a home appliance, a laptop, for some house repairs and even for a vacation. The reason doesn’t matter when it comes to personal loans. In a personal loan, the lender is giving the cash not to your business, but to you. The differenced are very clear. In a personal loan, the amount will be small. The bank does not ask for a collateral security against the personal loan. If you have a good credit score, you can get a personal loan pretty easy. However, in case of a business loan, you should have a business history. If not, then it is very difficult to get a business loan.
Can you use the personal loan for a small business? Yes. If you are still in the process of starting a new business, then you can use the personal loan. For a personal loan also, an excellent credit score is required. If the bank finds out that you do not have a good credit score, then the chances of getting the personal loans are pretty less. The bank or the lender need people who have got the capacity to repay the loans. When you use the personal loan in your business, you are combining your personal and business finance. If not handled properly, it could create issues when the business grows. As soon as you take smaller loans, you will be able to repay it quickly, and it helps in getting a decent credit score. If you are not getting any business loans, then there are other financing options like credit cards.
Before taking any kind of loans, do the homework well and then approach the bank. You will see a lot of loan options available. However, finding the best one among the lot is the challenge.