When it comes to funding your entrepreneurial goals, the first thing that comes to your mind is to obtain a business loan.. A business loan is essentially offered to established companies and usually has minimal turnover requirements. In addition, it is often given after careful consideration of a company’s business profile, loan purpose, and the collateral it has provided.
Yet, if you are a budding entrepreneur, you might find it difficult to qualify for a business loan. This is no surprise, considering many businesses struggle to successfully obtain business loans, especially during the first few years of their operation. In that case, your next best solution is to apply for a personal loan instead. Personal loans typically have fast loan approval in Singapore compared to business loans. To find out the viability of utilising a personal loan for business purposes, read on to assess whether this alternative proves to be a prudent choice.
What is the difference between a personal loan and a business loan?
As its name implies, a business loan is designed strictly for a business. It is usually offered to your company – not to you personally – and comes with different eligibility requirements, loan terms, and interest rates. Business loans can be utilised for a wide array of business expenses, but you cannot use them for personal expenses. This means that you cannot use the business loan to purchase a personal vehicle or a residential property. Otherwise, you will be violating the terms of your loan agreement.
On the contrary, you can utilise a personal loan for nearly anything you need, including both business-related expenses and personal expenses. Although business loans and personal loans are similar in numerous ways, there are several important differences between them aside from their intended purposes. For one, personal loans are typically unsecured easy cash loans, while business loans often require collateral.
Common reasons why borrowers opt for a personal loan
As mentioned earlier, there are a few essential differences between business loans and personal loans. These differences convince many borrowers to opt for the latter because they tend to be less strict and easier to obtain. Here are some major reasons why many borrowers choose personal loans over business loans:
- Lack of collateral: Financial institutions and money lenders usually require borrowers to put up collateral to secure a business loan. Small and budding businesses may find it hard to support their business loan application with adequate collateral, so they opt instead for a personal loan, which can be taken out without the need for collateral.
- Poor credit: A great credit score is established over time. As such, small and new business owners may not have established it yet at the time of their application for a business loan. Because business loans usually come in larger amounts and more sophisticated loan terms, most money lenders require applicants to have a good credit score to get approved for the loan.
- Low income and capital investment: Your business’ income flow is indicative of your repayment capacity. A business loan has a higher income requirement compared to a personal loan. Aside from income, your capital investment should also look solid to successfully obtain a business loan. If your capital investment is low, your business profit will look weak, and this will likely result in the rejection of your business loan.
- Eligibility: The eligibility requirements for business loans tend to be stricter than those for personal loans. If you are applying for a personal loan, you may only be required to provide your address, identity proof, ownership proof, business proof, and income proof. On the other hand, if you are applying for a business loan, you may be required by your money lender to provide profit projections and future business plans in addition to the basic requirements.
There are several ways to finance your business needs. However, not all of them are easy to acquire and advisable, especially if you are still a budding entrepreneur or a small business owner. If you are currently in need of additional funds for your business but lack some of the essential requirements to be eligible for a business loan, you can always opt for a personal loan that comes with more liberal requirements and faster loan approval.
Should you need a reliable personal loan or business loan to achieve your financial business objectives, Orange Credit has its door open for you! We are a trusted licenced money lender that provides individuals and businesses with a wide array of premium instant cash loans, including personal loans, business loans, bridging loans, payday loans, foreigner loans, and debt consolidation loans in Singapore. For more information on how our loans can help your business, please do not hesitate to contact us today.