However, there is still a lot of confusion among young entrepreneurs about whether they should get a business loan or a personal loan. Although there is no perfect response, a thorough analysis of the background and stage of the company could help young entrepreneurs make an informed decision.
You may be a business owner who wants to grow his company or someone who needs money to buy machinery or equipment for the company; whoever you are, understanding the best way to finance your small business needs is critical. A business loan is the first option that comes to mind when it comes to funding your company, but many entrepreneurs believe that a personal loan is also an excellent option.
A Standard Chartered Bank Personal Loan is an unsecured loan with a flexible end-use that can be used for both personal and business purposes by an entity. A personal loan of up to Rs. 40 lakh will assist a businessman in dealing with various business finances.
Personal loans are a type of loan created by financial institutions to meet a person's specific needs, such as a wedding, home renovation, or an unexpected cash outflow. Interest rates are usually very high. Entrepreneurs who take out personal loans instead of business loans will pay a higher cost of funds, which is not beneficial to a newly formed company.
In comparison to a business loan, a personal loan usually has a shorter repayment period. This means that entrepreneurs would have to make a higher monthly EMI payment. For companies that have only been in service for a short time, this effect on cash flow is not favorable.
If the company qualifies for the government's credit guarantee program, the owner can get up to Rs. 1 crore in collateral-free loans. In this scenario, a large business loan with a lower interest rate, as opposed to a personal loan, bodes well for the company. Meanwhile, for someone who is just starting out in the industry, a personal loan of Rs. 1 Crore with no collateral is a big ask.
Although you can get a personal loan right away if you meet the basic requirements or simply step into your nearest ATM, it can only help you with an emergency business need. Taking out a personal loan to grow your company is not a good idea. Instead, savvy entrepreneurs would apply for a business loan.
Entrepreneurial loans are designed specifically for experienced and aspiring entrepreneurs. Loans are available for working capital, equipment import, office setup, and other purposes. As a result, you have the right to choose the best loan for your business needs.
Here are some situations in which a business loan might be beneficial to you as an entrepreneur.
If you meet the minimum eligibility requirements, you can get a personal loan right away. Some banks also offer instant loans but you must have knowledge of the Personal Loan EMI Calculator, which allows you to get pre-approved for a loan simply by walking to your ATM. A personal loan can be your best friend in the event of an emergency during the startup process of your company.
Loans may be required by a business to manage working capital, expand its footprint and facilities, import systems and equipment, and so forth. Since such loans require a large sum of money, it is in the best interests of the company to ensure that the cost of raising capital is feasible and affordable.
Conclusion:
If you already have a personal loan, the chances of having another one are slim. Since personal loans are dependent on your wages, you will not be able to get a sufficient amount of money even though you qualify. In this situation, a business loan is more advantageous.
