A personal cash loan is granted to take care of family, medical or household items while a business loan is granted to take care of business purposes. Some types of personal cash loans include fast cash loan, easy cash loan, instant cash loan and fast approval loan among many others offered by lenders. As for business loans, some include bank loans, invoice financing, cash flow loans, asset based financing, mezzanine financing and more.
Differences between personal and business loan options:
- The most notable difference is the speed which the loans get approved. Personal cash loans take a shorter time; sometimes less than 24 hours, to be approved as compared to a business loan which may take weeks and sometimes months to be approved.
- The requirements differ such that a good credit score might not be necessary when applying for a personal loan, but a business loan demands that the owner have a high and reputable credit score. Some will require a credit score of about 700.
- Less paperwork is needed for a personal loan as compared to the paperwork needed for a business loan.
- Personal loans are attractive because they are fast and can be considered by businesses which need less cash and do not meet the needed credit score.
- Unlike business loans, you do not need collaterals to secure a personal loan. Many small business loans are often denied due to insufficient collaterals.
Is taking a personal cash loan for business purposes a good idea?
You are definitely allowed to use personal loans for your business, but the question is, should you? Business loans use the company’s reputation to approve of a loan. These loans are set with conditions that they can only be used as stated in the business plan used when applying for the loan. Personal loans, on the other hand, are given to individuals and sometimes the lender evaluates the credit history of an individual and is more flexible on how you can use the funds borrowed.
When should you seek a personal loan for your business?
If your business is a startup, you might encounter obstacles in trying to get funding. All businesses start with the ideas, then seeking funds to bring ideas to reality. Many financial institutions do not fund business ideas, they fund businesses with a credible cash flow and a business plan which seems promising. Most businesses starting out might have to consider applying for personal loans to fund their businesses. Since your business is in the early years of start-up, you will have a low credit score and that greatly decreases your chances of obtaining a business loan. What is important here is to keep detailed track of both your personal and business loan to prevent any mix ups and start building your own business’s credit score.
Small amounts of loans
As much as banks are willing to loan money to businesses they are reluctant to loan small amounts of money. The reason is the loans will yield less for the institution in terms of interest rate. Yet, they use the same amount of manpower like they would have for larger amounts of loans. So if you only require a few thousand dollars to boost your business, take out a personal loan.
Some businesses have a less credible cash flow and they do not have any valuable collateral to offer as security for a business loan. If you are in this situation, a personal loan would be your best bet right now. You should consider this before offering your only home as collateral because you will lose your home should you fail to repay your loan.