You might assume that personal and business loans are the same since they’re both loans. Well, you are partially right. However, when it comes to the process, these two different loans are not the same.
Before you apply for a loan, you’ve got to know the differences between personal and Business Loans Indianapolis.
Timeline for the Application Process
One of the differences between personal and business loan is the actual time length between getting the money and applying.
With a lot of online lenders providing instant decisions, the application process for a personal loan can move extremely fast. But, you’ve got to be cautious of the terms and interest rates they apply.
On the other hand, applying for a business loan takes a lot of time, given the number of details that a lender requires. Greater inspection is needed as bigger amounts of money are typically involved. Also, on a couple of occasions, lenders might offer extra business guidance and support to guarantee the money is properly spent. If you’re a new business owner, this can be advantageous.
Required Documents for Application
It is vital that you know before you apply that business and personal loans need various documentation. Normally, the lender will only need proof that you can repay the loan if you’re applying for a personal loan.
On the other hand, it is normal for the lender to ask a copy of an analysis of the industry that your brand operates in, loss/profit statements, credit history, cash-flow reports, and your business plan if you’re applying for a business loan. Almost every single one of these documents has to be generated as standard. However, you’ve got to guarantee that these documents are updated for the loan application process to smoothly run.
The Use of Funds
Almost every lender will want to see proof of income and that you’ll be able to repay it when you’re applying for personal loans. This can be a bad or good thing depending on your personal credit score. Typically, the lender is not interested in seeing proof of what you will use the money for. This does provide you the ability to use the money on whatever you want.
On the other hand, the lender will want to guarantee it is being used for business intentions whenever you’re applying for a business loan. Loans for buying new equipment or renovating the business will be accepted. However, the lender might ask for more details if you’re going to use the loan for a risky investment.
The Loan Amounts
When comparing business and personal loans, the amounts you can apply for is one of the first differences you will notice. In general, personal loans have a tendency to be for smaller amounts. Typically, they are not secured.
On the other hand, a business loan usually will have a bigger amount of range. Also, they’ve got to be secured. This means that you might have to submit a guarantee or collateral for the loan. The lender will be able to collect the collateral if you aren’t able to repay the lender.