When you own a business, there are several financing options available to you to help you get your business off the ground and keep operations running smoothly. Two of the most common are business loans and personal loans.
A business loan is a type of finance specifically designed for business purposes. A business, or a sole trader, may take out a business loan to cover expenses they are unable to pay for upfront. Such expenses could be associated with growing the business or managing cash flow.
A personal loan is a type of finance that consumers typically reserve to help fund the purchase of big-ticket items, like a car, holiday or wedding. However, as a business owner, you may be able to use a personal loan for business purposes, depending on the loan provider’s lending criteria.
Many lenders limit what you can do with one of their personal loans, to help reduce their financial risk. So, you may find that your preferred lender does not allow for personal loan products to be used for business purposes.
The two types of finance do, however, have similarities in the way they work, including:
- Both are money borrowed from a financial lender
- Can be secured or unsecured
- Have either fixed or variable interest rates
- Typically have fees attached
- Are repaid over a fixed term
Disclaimer: Please note that at the time of writing, RateCity does not currently have business loans on our comparison tables. Speak to your preferred lender directly for more information on a business loan.