A business needs a steady flow of funds in order to survive and grow. The needs of a business are myriad such as working capital, money for marketing campaigns, capital for business expansion, product development, research and development, staff training, or purchase of equipment. The financial requirements of a business need to be addressed instantly and a business owner will want to have quick access to the funds. As a solution, the owner might want to avail of a business loan or personal loan. However, which one should he go for? Is it wise to avail of a personal loan for business? Let us explore further.
Advantages of personal loan for business
If you are a business owner, listed below are a few advantages of a personal loan for your business requirements.
Easier to qualify
It is easier to qualify for a personal loan than a business loan. In case of a business loan, you will have to prove the viability of your business with documents, business plan, and funding requirements, among other requirements. The credit appraisal process of business loans is stringent. Even after submission of all documents, it is doubtful whether your loan will be approved or not. However, in the case of personal loans, a lender will consider your current flow of income and credit history.
Faster disbursal of loan
If you are in immediate need of funds, it is best to opt for personal loans. It can be disbursed in a matter of a few hours. On the other hand, business loans go through a lot of processing that is why they take a long time for approval.
No need for collateral
One advantage of personal loans is that they are mostly unsecured. These loans do not require you to show any collateral or deposit any security. In case your business is not functioning smoothly and you are not very sure how to repay the loan due to a cash crunch, there is nothing to worry. The lender will not be able to take possession of your asset even if you default on your loan. Hence, there is very less that is at stake.
Disadvantages of personal loan for business
Apart from these advantages, a personal loan for business has the following drawbacks.
Impact on your credit score
Personal loans have a direct impact on your credit score. If your business is not able to deliver results and you are not able to service your loan on time, it has a direct bearing on your credit score. As a result, it becomes difficult for you to avail of loans at later stages.
Higher processing fees and interest
The processing fee for an unsecured personal loan is more than that of secured loans. This means that you get a lower sum towards the loan. They are also characterized by high-interest rates than other forms of loan. Due to the lesser amount of loan disbursed, it does not make sense to avail a personal loan for business.
Limited amount of funds available
A business requires a huge amount of funds as compared to personal needs. If you opt for personal loans for business, the quantum of finance received will be limited. This may not suffice your requirements for business. A business loan, on the other hand, can raise a larger sum of money, once it is approved.
When it is required for business, it is best to opt for business loans only. Though personal loans have some advantages, it is usually short-term in nature with limited financing available. Therefore, it is best to check the features of various loans offered by different lenders and make an informed choice.
Applying for a Bajaj Finserv Personal Loan for business with Finserv MARKETS is easy, convenient and completely hassle-free. What’s more? The entire process is online and completely transparent. So why wait? Avail a business loan with us and get your business on the growth trajectory, today!
You should also read about the tax benefits on personal loan.
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