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Business Loans vs. Personal Loans

Business loans can be used to cover various expenses, including working capital, and equipment purchases.

Business loans are a type of financing that businesses can obtain from traditional banks, online lenders, and credit unions. They can be either a lump-sum payment or a credit line, and in exchange for this funding, the business agrees to repay the money it borrows over time, plus interest and fees.

 

A personal loan is a type of unsecured loan that can be used for a variety of purposes, such as debt consolidation, home improvement, or travel. The repayment terms for personal loans can vary, but they are usually repaid in fixed monthly payments over 12 to 84 months. 

The Differences Between Personal Loans and Business Loans

As you've read, business and personal loans are two types of loans that individuals can use for different purposes, but what are the main differences? Below you'll see some of the main factors that separate the two types, as well as some things that they have in common. 

Business Loans
  • - Made strictly for businesses
  • - Usually have higher borrowing limits
  • - Typically lower interest rates
  • - Require extensive financial documentation
  • - Can be secured or unsecured
Personal Loans
  • - Made for individuals (though they can be used for personal or business purposes)
  • - Usually have lower borrowing limits
  • - Typically higher Interest rates
  • - Require less financial documentation
  • - Can be secured or unsecured

Using a Personal Loan for a Business

Personal loans can be used for business purposes, and they are often a preferred option for smaller and younger businesses as they are generally easier to qualify for at early stages. However, it's always important to consider the pros and cons before making a decision. 

 

Using a personal loan for business purposes means a simpler application process, typically less collateral, and flexibility with how you use it, but can also mean lower borrowing limits, higher interest rates, and little if any benefit to your business credit score. 

 

Before committing to using a personal loan for your business, make sure you do your research and compare lenders. It's important to never take out more money than you can afford to pay back as doing so can have a significant and long-lasting impact on your future finances. Make sure you spend some time hatching a business plan and a repayment plan before borrowing.

You should also check the lender's restrictions before applying, just to make sure you can use the loan for business purposes.
 

Which Type of Loan Should You Choose?

Whether to choose a business loan or a personal loan depends on your specific situation and needs. If you're starting a new business, a personal loan may be easier to qualify for, but not every personal loan lender allows funds to be used for business-related expenses. 

 

A business loan may be best for established businesses that need money to purchase equipment or fund operations. It's important to compare loan offers, examine the potential outcomes and repercussions, and weigh business and personal needs before deciding.

Secure Your Business Loan Today

If you do decide that a business loan is the type of loan you want, we can help. Just answer some basic questions about your business and, using this information, we will find the most suitable loan provider for your business. 

 

It's completely free and non-committal tap the button to get started. 

FAQs

Your Questions Answered

Business loans are made strictly for businesses, usually have higher borrowing limits, and typically have lower interest rates. They also require extensive financial documentation and be can be secured or unsecured.

 

Personal loans, meanwhile, are made for individuals (though they can be used for personal or business purposes) and have lower borrowing limits as well as typically higher Interest rates. They also require less financial documentation and, like business loans, they can be secured or unsecured.