As a business owner, you will at one time or the other require extra capital to keep your business running. In this situation, the go-to alternative is to consider getting a loan. Although business loans seem to be the appropriate option to consider, personal loans are also a viable option for this purpose.
This article provides you with all you need to know about these funding options — differences, advantages, disadvantages, etc.
Personal Loans vs. Business Loans: Differences
Personal loans are funding options available to individuals, usually in a fixed amount, and they can borrow them at a fixed rate over a period of time. We also know this loan option as unsecured loans. This is because you can borrow them without securing it against any asset. That is, you can borrow from a financial institution without collateral and with an agreement to pay at a set date in fixed monthly repayments.
Pros and cons of Personal Loans
- You can spread the repayment of personal loans over a long period. This can be as long as 5–7 years.
- Most personal loans are unsecured. This means you don’t need collateral to secure a personal loan.
- You can borrow the exact amount you need as fast as possible.
- The interest rate of personal loans is higher than compared to business loans
- The maximum amount you can borrow on a personal loan is limited.
As the name implies, they specifically intend business loans for funding your business needs. This funding option may either be secured or unsecured. With a secured loan, you will need to pledge an asset against the amount the financial organization releases to you. If you cannot meet up with the repayment, they will claim your asset in replacement for the funds released. Unsecured loans on the other hand do not require collateral.
Pros and Cons of Business Loans
- Business loans offer you larger amounts to personal loans
- Interest is tax deductible
- The repayment of the loan is the responsibility of the business and not the individual
- Lengthy application processes as compared to personal loans
- Not all Businesses can access business loans
- To access this funding option, your business must have a positive trading history.
Is it better to get a personal loan or a business loan?
Getting either a business loan or a personal loan depends solely on your financial or business needs at the moment. If you are looking to lend a lot of money to grow your business, then we will advise a business loan. This is because with business loans you have access to a higher credit limit as compared to a personal loan. Also, if you are looking to improve your business’ credit history, you can leverage business loans.
However, if you need quick funds without collateral, then you can access personal loans. In fact, nowadays, there are lots of Fintech companies offering quick loans that can be disbursed in a matter of minutes. In addition, if your business is still small, you can leverage business loans, this is because it might be very hard for you to secure a business loan at this time because of your credit history.
Where can I get Business and Personal loans in Nigeria?
In Nigeria, asides from banks, there are a few online lending platforms that offer business owners quick and accessible business loans. These financial organizations are reliable and secure. In no particular order, some of them are:
Loans are splendid solutions for businesses who do not want to go through the stress of finding an investor or business partner. As a business owner, you can leverage either a business or personal loan. However, it is important that you ensure you can meet up with the lending requirements before taking up the loan.