Starting, buying or running a small business of any kind is a complex undertaking, and that has never been more true than it is today. No matter what industry we are talking about, there is no end to the long list of challenges that small business owners are forced to contend with daily.
There are struggling small business owners that find themselves short on their day-to-day finances or contending with unexpected expenses all the time, and many of these situations can severely damage a business’s long-term outlook. And at these difficult crossroads, many small business owners begin to explore options to finance their operations until they can right the ship.
Personal Loans vs. Business Loans
If you find yourself in a place where you need to borrow funds to bridge the gap in your business, the first step is understanding the type of loans that may be available to you.
Personal loans are similar to personal credit cards in that they make funds available to a specific person with the expectation that that person is responsible for repaying the amount borrowed. They differ from credit cards in that they are typically a lump-sum amount loaned to an individual for a specific purpose with a set monthly payment over a specified term.
These loans are made based on a person’s credit history and usually appear as installment loans on that person’s credit report.
Business loans are another option that may be possible if your company has a proven track record of generating revenue and paying its bills. Business loans are generally intended for improving one specific aspect of your business and are not meant to provide working capital for a struggling operation.
When Can I Use a Personal Loan for Business Purposes?
As a general rule, as long as you are open, honest, and upfront with your lender about your intended use, you are free to use personal loans for business purposes.
Whether you are starting a new business from scratch or have already exhausted all other options from a business loan standpoint, personal loans can provide the cash you desperately need. You just have to be willing to put yourself on the hook for paying them back, no matter what happens to the business.
Acquiring a personal loan for any purpose will depend on your personal credit score. Assuming you have decent credit, you will likely find that the process of getting approved and funded is much easier with a personal loan.
For more information on the difference between personal loans and business loans, and a more detailed explanation of when it might be best to use each, contact the experts at Unsecured Funding Source today!