Which is more advisable for small business - Business Loan or Personal Loan

by Finway FSC Empowering People Financially

India’s sound banking system and sector plays a very important role in the growth of country’s economy. People deposit their surplus funds in the banks. These funds are further lent to the various emergent industries of the country making productive investments. These investments are also made in developing India’s agricultural and rural sectors which stand as the backbone of the country.

 

People are planning their income and expenses in proper ways to make the right investments to secure their future. Investing in the real estate for purchasing a land or a house by applying for home loans in Delhi and other places in India are quite common nowadays. 

 

The booming Indian economy has led to the rise of many existing and new companies in various sectors. Apart from scheduled banks, several private financial companies also help to invest in various large and small businesses. One may consider of applying for business loans to finance a small business endeavour. Some believe it is feasible to opt for personal loan in this regard. One should consider all the potential results and its consequences before undertaking any venture.

 

Business loans for Businesses

 

Advantage: Proper use of secured or unsecured business loans help to build financial credibility of one’s business which will help to generate future opportunities like high loan limit and good trade credit.

 

Disadvantage: One has to go through a daunting and lengthy procedure in case of business loans. For a new venture it may consume a lot of time in paperwork and chances of rejection can be high at any point of time. In some cases, loan against property are provided as a personal guarantee which is again a matter of risk of losing an asset if in default.

 

Personal Loans for Business

 

Advantage: Personal loans are quite easier to get approved. In such case, lenders sanctioned the loan on basis of credit score of the borrower. Whereas in business loan, lenders analyse one’s business credit, business plan, other financial statements and records. Generally, personal loans for business do not require any collateral which can be difficult to organise for small business.

 

Disadvantage: One of the backdraws of personal loan for business is having a low rate of interest and lower lending limits. There is risk of hitting one’s personal credit if the business defaults. Personal loans for business affect the growth of business credit wrongly.

 

There can be always a dilemma in considering which one is suitable for a small business. Thus it is advisable to consult a financial advisor for helping in choosing the appropriate loan for one’s business.

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Created on Aug 29th 2019 04:00. Viewed 578 times.

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