Find out why it is a good idea to take a Personal Loan for Business
Finding the funds to transform your idea into a new business can be a challenging task. Getting a business loan in India from financial institutions is never a cakewalk, and hence entrepreneurs seek out other alternatives. Personal loans are one such substitute, which can be used to fund your enterprise. But before you sign up for one, it is critical to understand the details involved.
What is the Difference Between a Personal Loan and Business Loan?
When a borrower takes a personal loan, it is usually to meet his personal expenses, like buying a car, refurbishing the house, funding a trip, etc. On the other hand, a business loan is taken only to meet the financial requirements of your business. You can use this capital to buy equipment, rent an office space, and pay your employees among other things. A personal loan is usually unsecured, which means that the lender does not keep any security or collateral against it. On top of that, there are no restrictions levied on how exactly the money should be used. However, because of these benefits, financial institutions do a thorough check of your credit history, current income, repayment history, EMIs and CIBIL credit score.
Should Personal Loans be used for Business?
Now the question arises if you can and should use your personal loan for business. According to certain statistics, more than 50% of small business start-ups are funded by personal loans. Let's look at the reasons why entrepreneurs think that personal loans are a better option.
- If you are starting a small business that does not require you to hire employees, manufacture products or rent a space, then taking a personal loan is a good idea. This is because financial firms are reluctant to give business loans to small ventures as they are prone to failure. The lenders have strict rules and are also quick to ask you to return the capital if your business is failing. However, personal loans are free of such problems. Thus, you may find it a lot easier to get a personal loan than a business one! Non-banking financial corporations like Bajaj Finserv give Personal Loans of up to INR 25 lakhs with easy approval policy.
- For a startup to succeed, it is essential to get things done as quickly as possible. However, even when you apply online for business loans, the procedure is usually lengthy and complicated. To make matters worse, you might not get the loan even after the long wait! The alternative is to apply online for a personal loan. With Bajaj Finserv, you can get your Personal Loan approved within 90 seconds!
- In most cases, the lender will ask for a personal collateral when giving you a business loan. Why risk your home or car for a loan that has terms and conditions aplenty? Instead, get a secured personal loan with which you can fund your business while your personal assets are listed as collateral. This way, your startup won’t be continuously monitored by the financial institution.
- If you have a good credit history, then a personal loan will be a lot cheaper than a business loan. This is because your business history is completely blank, but your personal history shows that you are reliable and trustworthy. Hence, personal loan interest rates will be much lower than business loan interest rates.
- Using Bajaj Finserv EMI Calculator, you can change the parameters like loan amount, tenor, and interest rates to figure out which plan best suits your needs. Without having to run from one branch to another, you can sit at home and finalize your future business plans.