When To Finance Your Business With A Personal LoanEstimated reading time: 2 minutes
When To Finance Your Business With A Personal Loan

When To Finance Your Business With A Personal Loan

Posted on Wednesday, September 7th, 2016 | By IndusInd Bank

Thousands of new and innovative ideas are being constructed into business ventures every year. India’s business sector is gaining momentum having more than 4,000 startups to its credit during the year 2015.

With the call for business development comes the need for finance. There are many business loan products available in the market today for small, medium and large businesses. But the business has to satisfy many criteriums to avail a business loan. Instead, for certain business needs, availing a personal would be a better choice. But, under what circumstances should you use a personal loan for business purposes? The answer to the question can be derived from the following:

Documentation and Loan Amount:

Application for personal loans involves minimum paperwork and can be done online. In case the loan amount required is small, you would not like to go through lengthy procedures to procure a loan. Personal loan satisfies your immediate cash requirements with minimum documentation.

Interest rates:

Interest rates for personal loans are much lower than business loans. Banks also offer interest rates depending upon your relationship with them. Having an account with the bank from where you are taking a personal loan is an added advantage. As an account holder, you are treated as a privilege customer, and further consideration of interest rates are extended to you. Business loans also provide you with low-interest rates but those are loans secured against your business assets.


Personal loans are unsecured loans. No collateral or security is to be provided for availing the loan. Therefore, if you acquire a personal loan, no charge on your personal assets is created. You can further take a loan against such property (assets) separately for crucial business requirements. Some banks do provide business loans without collaterals but those are in the form of Overdrafts and the interest rates are much higher.

Credit assessment:

In the case of startups or new businesses, virtually, there will be no credit report or track record of the business. In such a situation you can opt for a personal loan and take advantage of you personal credit ratings and track record.

Business not liable:

Your business, being a separate legal entity, will not be affected by the personal loan transactions. The bank will not have any lien on your business assets to recover the personal loan, though you will be personally liable for the payment of your personal loan. A personal loan is an excellent tool for short-term financing of your business. It ensures the smooth functioning of your business without disturbing its financial structure.

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