Personal or business loans, which loan should you choose? Sole proprietors – you are not alone! Let Fincheck assist you.
Do you need Personal or Business Loans?
It’s a tricky thing starting your own business. It could be a real headache to attain the right form of financing. You may even be in the position of owning a running a business, but you are in need of business finance to see that project come to life.
Many factors come into play now. You have to consider what type of agreement you want with the credit provider. Small business owners have such unique situations. Please remember that for a loan to be granted it has to be based on a credit record. Whether it’s your own credit record or that of your business, a loan won’t be granted without the reasonable promise of repayment.
There really isn’t a “one size fits all” solution to this question. So to answer the question let’s look at a few characteristics and needs that will determine the type of loan that will suit you.
It could be that you still need to start your small business. To start your business you are in need of financing. But acquiring personal or business loans means your business needs a track record. For the sole proprietors starting a small business – a personal loan could be a good idea. This will give your online loan applications a greater chance of success seeing as you have a credit record to offer for the loan application.
Let’s say your credit score isn’t that good. And you are in need of a substantial amount of business finance. Then it could be a good idea to take out a business loan. The terms and conditions granted can also be more favourable when the business offers certain assets as collateral for the business loan. It could be that the business has assets in value far beyond the reach of your personal capacity. Small business owners can use the assets of the business as collateral for the securing of the loan.
To summarize this information here are a few pros and cons for the sole proprietor regarding both types of loans.
- A personal loan is easier to acquire.
- Personal loans can be unsecured – you won’t lose your personal assets in the case of defaulting on payments.
- Your business doesn’t need a track record, you can get financing based on your personal credit score.
- The lack of your business’ ability to repay the loan will have a negative effect on your personal credit score.
- A personal loan may not supply sufficient financing for the needs of your business.
- You can use the credit record of your business to apply for loans online.
- Using business assets as collateral to secure a loan will hedge you from losing personal assets.
- The amount of financing is larger than compared to that of a personal loan.
- It is harder to get a business loan compared to acquiring a personal loan.
- Not all businesses can qualify for a business loan.
Please know that it is possible for a credit provider to keep you accountable in your personal capacity for the bad credit of a business loan.
Fincheck hopes this will give you some food for thought. You know the need of your situation and the unique characteristics of your sole proprietor business.
Go have a look at the Fincheck loan comparison page to see if there are any offers that attracts your business’ wallet. We host only reputable and reasonable lenders.