Business Loans vs. Personal Loans

Business Loans

If you are starting or have recently started a business and you need more operating capital, you are likely going to need a loan. This brings you to the choice of a personal loan or a business loan. There are advantages and disadvantages to both types of loans, so you must carefully decide which is right for you.

The great advantage of a personal loan is that you can use your personal credit score to qualify for the loan. Often when someone needs a loan for business, the business is fairly new and that makes it harder to qualify for the best business loan available. A business owner’s personal credit is often more established. Personal loans can be unsecured (usually with a higher interest rate) or they can be secured by collateral. Of course the downside of using a personal loan for business purposes is that if your business has problems, your personal credit and assets will be in danger.

For a business loan, credit agencies like Experian and Standard and Poors determine how credit worthy a business is by evaluating its credit rating, which is determined by a number of factors, including financial factors, the location and type of business, how long it has been in operation, how many people are employed by the business, and more. To get the best business loan they can, a business owner should look carefully at the factors that make up the credit rating of the business and try to get those factors to look as favorable as possible before applying for the loan.

There are private business loans and there are government-arranged business loans for special purposes (disaster recovery, for instance). The Small Business Administration (SBA) can help small business owners to find a loan, or there are many websites that can help someone find the best business loan for their situation.

Both personal and business loans can be used for business purposes, but business loans are the only way to secure money without putting personal financial assets and credit at risk.

For more information, go to Business Loan at

Business Loans vs. Personal Loans was last modified: January 13th, 2012 by Amit Kraidman
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