There's a big world of loan products out there, but chances are when it comes to financing your business, you've only focused on one category: business loans.
That makes a lot of sense-if you're looking to expand your business, then why shouldn't you look for a small business loan? That's the point of small business loans, after all. The lenders, products, criteria, and payment structures of business loans are specially designed with business owners in mind. They were made to fit.
But you don't want to take it for granted that business loans are the only loan products that can help your company succeed. If you're willing to get creative, it's possible to find funding that fulfills your particular needs where a business loan might fail, or only come through halfway.
Personal Loans vs. Business Loans
What's the big difference? Before you can decide whether one or the other works better for you, we'll have to take a closer look at how they function.
Business Loans
Traditionally, business loans serve business owners looking to get some extra cash-whether because they needed to fix a problem, grow in a particular direction, or just have some capital cushion. No surprises there.
Since the 2008 financial crisis, though, big banks tightened their belts and stopped passing credit around as freely... Leaving most small business owners out in the cold. Alternative lending changed the game by recognizing that small business owners with less-than-excellent credit or revenue were being underserved, and began offering smaller, faster, more expensive loan options.
That said, business loans still require quite a bit of time and effort to secure. Whether you're going for a bank loan or one backed by the Small Business Administration, the bigger fish can take weeks to qualify. If you're comfortable with smaller or shorter-term loans, you're looking at faster qualification periods and less legwork, but still nothing insubstantial.
With a business loan, the focus is on your business-and that's why the process is so involved. Businesses have so many moving parts, and your lender, whether they're a bank or a startup, will want to feel pretty confident that you'll be able to pay them back.
Personal Loans
On the other hand, personal loans are naturally for personal matters. You might be taking one out to pay for an appliance, home repairs, or a vacation. Or maybe you're financing an operation or a wedding, or consolidating credit. Whatever it is-and it really can be anything-a personal loan involves that bank or lender giving money to you, not your business.
The differences are pretty substantial: personal loans typically come in smaller amounts, don't require collateral, and focus on the individual rather than the business. This can work in your favor, or very much not. If you've got great credit, then you won't have as much trouble snagging that personal loan, even if you're planning on starting a business but haven't done a whit of research yet. But if you're looking for a business loan without any business history behind you, you might be facing a tough time. Plus, you can hide behind less-than-fantastic credit a bit if your revenue, time in business, and overall financials show strength-but underwriting for a personal loan doesn't take any of that into account.
Getting Personal
Interesting facts
Additional information
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Business Funding Secrets: How to Get Small Business Loans, Crowd Funding, Loans from Peer to Peer Lending, Government Grants and Personal Funding Ideas. (Quick Start Guide Book 1) eBooks |
