Would it be right to avail a Personal Loan for business use? This is a common dilemma for a businessman. Many times, people choose to apply for a Personal Loan instead of a traditional Business Loan to arrange for working capital.
The eligibility criteria for Personal Loan are simple, making it a great choice for entrepreneurs. However, if you are an experienced business owner, a Business Loan can also be a great option. Read on to decide which loan is appropriate to fund your business.
For some businesses, especially start-ups and newer businesses, it becomes difficult to avail a Business Loan. Since they do not usually have the required business vintage, banks tend to disapprove of their loan applications. For such businesses, Personal Loan can be a great option to arrange funds for expanding their businesses.
When a borrower avails a Personal Loan, they are personally liable to pay the loan amount, not their business. Hence, it is mandatory to pay back the loan, regardless of how the business performs. If they are willing to take that risk, it can be one of the most viable credit options.
Missing repayments can significantly impact credit scores. So, when applying for a Personal Loan, it is critical to assess your financial position. Since you are taking the loan for your business expenses, it is essential to assess the business's financial position such as income, profits, expenses, future forecasts etc.
Before you apply for a Business Loan to fund your business expenses, one of the most important things you need to keep in mind is that some lenders might ask for certain venture-related documents before they approve your credit application.
Other than the documents, some banks ask businesses to provide comprehensive business plans of profits and expansions along with their applications. Since Business Loans offer lower interest rates than Personal Loan, the approval procedure is equally difficult.
It would be prudent to apply for Business Loan only when you need substantial funds for your venture. If the required fund amount is smaller, you can apply for a Personal Loan. However, make sure to ask the lender if you can use these funds for business purposes.
Some of the most important advantages of opting for Personal Loan for business use are:
If you are just planning to start a business and in need of funds, it would be best to get instant Personal Loan online. Generally, banks tend to offer Business Loans to ventures that are already established and have a position in the market. Since new companies do not have any proven track records, it becomes difficult for them to get approval.
Sometimes banks or lenders ask for collateral from borrowers before they disburse Business Loans. Since you are just starting a company, you might not have any assets to pledge. In that case, you should opt for Personal Loan for a businessman to fulfil any venture-related obligations that you have.
You should opt for Business Loan only if the requirement of the fund is substantial. For relatively smaller amounts, it would be best to get a Personal Loan. This is mostly applicable when you are just starting a business and the company is still in its Research and Development stage.
If you avail a Personal Loan for business expenses, most lenders do not enquire about the use of funds. However, lenders will approve your Business Loan based on the plan of utilisation of these funds. So, you need to adhere to this plan after you receive the credit amount.
When looking for Personal Loan for business use, the eligibility criteria that you will need to meet include:
When applying for Personal Loan and Business Loan, here are some of the most important documents that are required:
Choosing between a Personal Loan for business use and Business Loan becomes easy when you have a comprehensive idea about these credit types. Whichever option you select, it is important to check the eligibility criteria, your financial condition and repayment ability. Otherwise, if you default on loan repayment it will affect your credit score.
With the right loan from Poonawala Fincorp, fulfil your dreams of business expansion!
We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Personal Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply
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