Personal Loans VS Business Loans: Which Funding Option Is Right For You?
When seeking funding for your business, you may be stuck choosing between a business loan or personal loan for business. Learning the differences between the two can help you make the right choice.
Before you start your search for the right lender, there’s one important decision you need to make: will a business loan or personal loan better suit your needs?
In this post, we’re going to look at the pros, cons, and key differences between personal loans versus business loans. With this information, you’ll be able to make the choice that’s best for your financial situation.
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What Is A Personal Loan?
A personal loan is money that is borrowed from a bank, credit union, online lender, or other institution. Payments are made on a scheduled basis over a set period of time until the principal (borrowed) amount is repaid, plus fees and interest charged by the lender.
While a personal loan is generally used for personal expenses (such as paying bills, car repairs, vacations, or emergencies), some business owners opt to take out a personal loan to use for business purposes.
These loans typically don’t require collateral, can be used for any reason, and can be obtained completely over the phone or online from non-traditional online lenders.
What Is A Business Loan?
Similar to personal loans, business loans are funds that are borrowed from a financial institution or other lender. However, borrowers must own a business and must use loan proceeds on approved business expenses.
There are various types of business loans, including short and long-term loans, equipment loans, SBA loans, and commercial real estate loans. Business loans can be obtained from traditional lenders (such as a bank) or through an online alternative lender.
Personal guarantees and/or collateral are typically required as a condition of receiving a business loan. You will have to also specify how you plan to use funds since loans must be used for business purposes.
The Key Differences Between Personal Loans VS Business Loans
Exploring the pros and cons of business loans and personal loans should give you a good idea about some of the differences between these two types of funding. But let’s break these differences down further to help you decide which option is right for you.
Personal Loan VS Business Loan FAQs
The Bottom Line On Personal Loans VS Business Loans
When it comes to loans, every business has unique needs. What works for one business might not work for your own. Before even seeking out a lender, determine if your business can afford a loan and if the loan will truly help your business grow. Then, carefully weigh out the pros and cons of business loans versus personal loans to find the best match for your specific circumstances. Finally, you’ll be ready to find a lender to fund your loan.
Once you’ve decided to move forward with a loan, make sure to do your research and compare rates. Start your search with our top personal loans and best business loans to find the best option for your business.