Comparing a Business Loan vs Personal Loan
When examining a business loan vs a personal loan, there are usually some clear differences and pros and cons for both products. You may find it to be advantageous to make a list of the different features and benefits of business loans and personal loans before deciding.
Business Loan vs Personal Loan: Which is Right for Your Business?
You’ve finally decided to start your own business and now you’re looking into ways to find your business and you’re wondering if you should take out a business loan or a personal loan? Typically, the answer would always be a business loan because of the advantages, liability (depending on how it’s structured and other factors), and tax benefits. With that said, there still are some people who have used a personal loan for business, but it might not be the smartest move. *You would always want to check with a business accountant, business banker, and business attorney before getting a business loan OR a personal loan for business, just to make sure that you’re making a wise decision and that what you’re doing is legal in your state. There can be conflicts of interest, liability questions, and co-mingling of personal/business debts when you attempt to use a personal loan to fund a business. So make sure that you get professional advice before taking out EITHER a business loan or a personal loan for your business. So when you compare a personal loan vs a business loan, you will want to examine the differences between a personal loan and a business loan.
The answer isn’t always clear-cut, as there are pros and cons to both business loans and personal loans.
Key differences when comparing business loans vs personal oans:
– Interest rates: Business loans may have lower interest rates than personal loans, depending on the type, term, collateral, etc..
– Loan amounts: Business loans may possibly be for larger amounts than personal loans, depending on the type, term, and if there’s collateral.
– Loan terms: business loans typically have longer terms than personal loans, but not always.
– Collateral: business loans may require collateral, while personal loans usually don’t (*always check with the lender before applying).
Personal loan vs business loan, and using a personal loan for business:
You will also want to consider the collateral and the separation of business and personal debt and assets before even considering using a personal loan for business. For example, if you consult with a great business accountant, business attorney, and business lender, there may be steps that can be taken to not only separate your personal and business assets and debts but also limit your personal liability in the case that your business gets sued or goes under. Most business accountants, business attorneys, and business bankers would probably advise you against using a personal loan for business purposes for a variety of reasons, but still, some small business owners decide to do it.
Using a Personal Loan for Your Business?
You might be wondering if it’s possible to use a personal loan for your business. The answer is yes – but there are some things you should keep in mind before taking out a personal loan for business purposes. Remember as we mentioned previously in this article: Most business accountants, business attorneys, and business bankers would probably advise you against using a personal loan for business purposes. * You definitely would want to check with the personal loan lender first to see if there’s any restrictions on how the loan can be used in the contract and whether or not the personal loan can be used for business or entrepreneurial purposes.
One of the biggest benefits of using a personal loan for business is that it may be easier
to get approved for a personal loan as compared to a business loan, because getting approved for a personal loan would depend mainly on your job, income, credit score, credit history, and debt-to-income, whereas getting approved for a business loan will depend on a variety of factors.
– May have lower interest rates than personal loans
– The interest payments may be tax-deductible. *Check with a business account before applying for a business loan.
– You may be able to get a longer repayment term
– The loan could be in your business’s name, not yours personally. * Always check with the lender, banker, and attorney before applying for a business loan to find out more about this.
Personal Loans :
– You may not need to put up any collateral
– The loan is in your name, not your business’s, so it shouldn’t affect your business’s credit score
– The interest payments are not typically tax-deductible
– You may have a shorter repayment term
Using a Personal Loan for Business
So, when comparing a business loan vs. a personal loan, or a personal loan vs a business loan, most business bankers, accountants, and attorneys would typically steer you toward a business loan, but not always. So which is right for you – a business loan or a personal loan? It depends on your situation. If you have good credit and don’t mind putting up your business as collateral, a business loan might be the better option. But if you don’t want to put up your business as collateral or if you have bad credit, a personal loan may give you some options. Ultimately, it’s up to you to decide which type of loan is best for your business. If you would like to compare business financing options, you can check out the table below or visit the business financing comparison page. You can also compare personal loans by visiting the personal loan comparison page.
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