Personal Loan VS Business Loan: Which Is Better For Your Small Business?

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It doesn’t matter if you are self-employed or you are running a business with two or three trusted employees, there is no denying that running a business is both exciting and fulfilling. This is especially true if you are doing something that you truly love about. Regardless, if you love what you are doing or not there are some times when businesses face tough spots and find themselves in need of cash. Maybe your business experienced a slow month. Perhaps, you are looking to expand. Whatever the situation is, there are two main options available when it comes to money lending. This would be a personal loan and business loan. Which could benefit your business the most?

The Uses Of A Personal Loan

One of the great things about a personal loan is that there are no restrictions as to how you use the money. If you want to out a personal loan and buy a new car, you have the option of doing so. If you want to take a personal loan to cover a slow month or pay off a creditor, you have this option afforded to you as well. When taking out the loan there is no set agreement as to how, where, and when you spend the loan. Some lenders will, however, impose certain restrictions as to what these loans can be used for, but for the most part, most lenders don’t.

The Uses Of A Business Loan

Business loans are great when taken from lenders like HittaSMSLån, but this doesn’t mean that they don’t come without their own set of restrictions. In fact, business loans by far pose more restrictions than personal loans. For instance, when taking out a business loan the funds can only be contributed towards business expenses. Of course, this could include anything from updating technology to purchasing new stock, paying rent, hiring new employees, or expanding your marketing efforts.

Collateral

In most cases, banks and other financial institutions do not require their customers to put up collateral on a personal loan. This means the personal loan is unsecured. Business loans, on the other hand, require collateral. Small business owners will need to put up collateral to get approved for a business loan.

Personal loans also offer easier and quicker approval. Most financial institutions will base the decision of whether or not to approve a personal loan on the applicant’s credit score. Other requirements may include a checking or savings account with the lender and active employment.

The Approval Process

When it comes to the approval process both business and personal loans can vary quite a bit. Depending on the lender that you are doing business with, it is usually easier to acquire a personal loan as opposed to a business loan. Most lenders for personal and business loans will consider your credit history and credit score along with similar criteria, but business loans are more extensive because they require more paperwork. With business loans lender not only have to check personal credit, but they also have to delve into your business credit as well. This is without a doubt make the process a bit lengthier.