Small Business Loan vs. Personal Loan

Small Business Loan

Small business owners are often faced with a choice of financing: a small business loan or a personal loan. These two choices each have their advantages and disadvantages, so it is important to understand each to make an educated decision about which loan is best for the company.

Small Business Loans: The small business loans are exactly as the name implies. The loan is provided to the business owner for the company needs and uses the business credit history and collateral owned by the company to secure the funds. A small business loan is provided by traditional lenders who are willing to work with local companies or businesses that are still working on growth.

The complication that comes with a small business loan is the fact that the company needs to have a well-established history as a business before the lender is willing to provide funds. Many lenders also require a certain number of years since the company was established, which might prevent new businesses from obtaining funds.

Personal Loans: A personal loan is taken out in the business owner’s name and is not necessarily applied to the company needs. Instead of using a company credit history and the property owned by the business, the personal loan checks the business owner’s personal credit rating information and might ask for personal property as a guarantee against the loan. The qualification requirements are less strict, but it is also not designed around the needs of a business.

The downside of a personal loan is the fact that using individual property like home equity to secure the funds might result in losing the property if the loan is not repaid. If the personal loan is unsecured, it also has the disadvantage of high interest rates when compared to a small business loan.

When looking for funds to help a company grow, business owners have a few options to consider. In most cases, the small business loan is preferable to other loans because it is specifically designed around the needs of a company. Applying for a personal loan is best left as a last option if the business loan is not available.

For more information, go to Small Business Loan at

Small Business Loan vs. Personal Loan was last modified: January 20th, 2012 by Amit Kraidman
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One Response to Small Business Loan vs. Personal Loan

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