The opinions of the entrepreneur are expressed.
Using an individual loan for your business, it may seem as a quick correction to get the required money. As a business owner, you want to make sure that your company is enough to grow and succeed. But you need to know the risk of confuse personal and business finances.
Many enterprise owners choose individual loans, especially because it is easy to get for new businesses. When you apply for a personal loan you decide whether lending, credit account, credit history, income and individual debts.
Unlike business loans, do not check your business credit, cash flow, annual income or business debts. If you have an individual loan, sustainable income and managed debt level, you will probably be confirmed for an individual loan. This involves individual loans for business owners who cannot get traditional business loans. But these loans are declining.
You can get personal loans from banks and online lenders. These loans are often not necessary, you should not need to be more accessible than small business management (SBA) loans or standard bank loans.
Related: 5 rules to go to personal debt as an entrepreneur
Business Loans vs Personal Loans: Which is better?
Your credit score plays a major role in choosing between work and personal loans. Personal loans show in your personal credit report and affect your credit account. The timely payment helps you loan, but the missed payments do it. You can also make it difficult for personal borrowing to get other loans later by borrowing.
Personal loans always require personal warranty. This means you are personally responsible if you can’t afford the loan. Even without collateral, lenders take legal action if you are standard. Some business loans also need personal guarantees, but not all.
See both risks and benefits to choose the right loan. Think about financial hazards. For example, use a home capital line for your business, when the job fails, put your house at risk. Most new enterprises within five years – Can you pay the loan if your business does not work?
When should an individual credit for work
If you can get a business loan with good terms, it is generally better choice. Business loans keep your money separately and they are able to offer tax breaks over interest. They also limit your personal risk. But sometimes individual loans are the only choice.
You may need to think about a personal loan:
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Your job is new and has difficulty getting business loans for two years
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Your job does not pay enough money or fell on sale lately
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You take a job that lenders see as risky (multi-level marketing, weapon sales, alcohol sales or mystery)
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To prevent high cost loans and need cheaper options
Most business loans do not specify their true costs. Some loads very high degrees. Personal loans are less often than the business financing options.
Business loans can often strain your cash flow with frequent payments – sometimes daily or weekly. Personal loans are attached to monthly payments, which is easier to manage.
Related: Last Guide for Personal Loan
Is it easier to get a business loan or individual loan?
Approval for personal loans depends on the two main things:
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Your credit score
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How much money do you earn
With good credit and sustainable income, you can get a personal loan without much problem.
Check for borrows for business loans:
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How much money does your work make
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Your personal and business loan
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How much did you have in
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What type of work you work (some businesses face more limit)
You need bank reports showing your business income to get a business loan. Opening a Business Bank account, helps you don’t have one. Traditional bank loans and SBA loans need more paperwork such as loans, work plans, tax forms and financial statements. These loans take to process several weeks or months. Online lenders often move faster by deciding during the day.
Good and bad points to use individual loans for work
Good Points:
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Simple paperwork: Personal Loans need less documents than business loans
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Quick money: You get faster funds with personal loans
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No need for a business loan: Check your personal credit instead of creditors
Bad dots
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Personal Risk: You are responsible for debt and missed payments damage your credit
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Rates higher: Personal loans are more expensive than frequently provided business loans
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Low loan amount: You cannot borrow with business loans
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Increase any business loan: Personal loans do not help build your business credit account
When personal loans make sense (and when not
When to use personal credit:
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New businesses needed in small amounts: Startups cannot often get business loans
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Quick projects with clear returns: You can pay back the loan soon when you know
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Business owners with no job credit: Personal loans may only be your choice
When to avoid personal credit
Large investments: Personal loans seldom cover large work projects in need of multiple money
High-risk enterprises: If you are unsure of the loan back, don’t risk your personal assets
When other financing options are: First see work loans, grants or other funding.
Related: 7 different credit you can get as a business owner
Other factors to think
Legal considerations:
Many loans do not allow you to use individual loans to work. It can cause money problems to break these rules.
Tax considerations:
You cannot remove your taxes private credit percentage. The interest rate of business is considered to be a tax record as often when used for work.
Cost management:
Using individual money for work complicates tracking costs. This can be a problem if you are checked.
Personal loans give you money quickly, but are risky. Business loans and other financing options work better for most companies. See all your choices and think about long-term effects before borrowing.
