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Business loans and personal loans serve two distinct purposes. A business loan is used to support business needs, which may include business debt consolidation, acquiring a new business, or boosting cash flow. A personal loan is used for consumer needs like home improvements or credit card debt consolidation. In a situation where you need to borrow money, you’ll want to consider the differences between business and personal loans to determine which is the most appropriate for you.
There are several advantages and downsides to consider before you take out a business loan.
Before using a personal loan, there are benefits and downsides to consider.
There are several points where business and personal loans differ, as shown in the table below.
|
Business Loan |
Personal Loan |
---|---|---|
Loan use |
Consolidate business debt, maintain daily operations with working capital, acquire a new business, purchase equipment, or other business-related expenses |
Consolidate high-interest debt or fund major personal expenses like home improvements or a wedding |
Amount |
Up to $500K1,2 with BHG Financial |
Up to $250K1 with BHG Financial |
Repayment terms |
May offer extended terms, up to 12 years1 with BHG Financial |
May offer terms up to 10 years1,3 with BHG Financial |
Documentation required |
Tax returns, bank statements, balance sheets, business plan |
Proof of employment, income verification |
Collateral required |
May need to secure the loan with equipment or commercial property and some business loans may require a personal guarantee |
Most personal loans are unsecured, meaning you won’t need to put up any collateral |
Length of time to fund |
As few as 3 days4 with BHG Financial |
As few as 5 days4 with BHG Financial |
Yes, certain lenders allow you to take out a personal loan to cover expenses for a brand-new business. However, BHG offers a unique financial solution designed specifically for entrepreneurs. Our startup loan is a business loan for non-business owners, allowing you to launch a new business or side hustle with all the advantages of commercial financing. For example, you could get a large loan up to $500K1,2 with extended terms up to 12 years1 to take advantage of affordable monthly payments. If you're planning to maintain your day job while you pursue entrepreneurship opportunities, our startup loan is right for you.
A business loan may be the better option if:
A personal loan may make sense when:
What does a bank look for before approving a business loan?
Banks evaluate credit history, financial statements, business plans, collateral, and the personal credit of the business owner(s). They also consider the industry and economic conditions. Strong financial health, clear plans for loan use, and sufficient collateral increase the chances of approval.
Do business loans have better interest rates?
Business loans can have better interest rates compared to personal loans, especially if the business has a strong credit history and financials. Business loans are often larger and secured with collateral, which can lead to lower rates. However, rates vary based on the lender, the type of loan, and the creditworthiness of the business and its owners. Personal loans, being unsecured and smaller, typically have higher interest rates.
Not all solutions, loan amounts, rates or terms are available in all states.
1 Terms subject to credit approval upon completion of an application. Loan sizes, interest rates, and loan terms vary based on the applicant's credit profile.
2 BHG Financial business loans typically range from $20,000 to $250,000; however, well-qualified borrowers may be eligible for business loans up to $500,000.
3 Personal Loan Repayment Example: A $59,755 personal loan with a 7-year term and an APR of 17.2% would require 84 monthly payments of $1,228.
4 This is not a guaranteed offer of credit and is subject to credit approval.
5 Business Loan Repayment Example: A $94,695 commercial loan with a 9-year term and an APR of 14.8% would require monthly payments of $1,591.
Annual percentage rates (APRs) for BHG Financial business loans range from 8.69% to 44.58%, with terms from 1 to 12 years.
Annual percentage rates (APRs) for BHG Financial personal loans range from 11.96% to 27.87%, with terms from 3 to 10 years.
Consumer loans funded by Pinnacle Bank, a Tennessee bank, or County Bank. Equal Housing Lenders.
No application fees, commitment, or impact on personal credit to estimate your payment.
For California Residents: BHG Financial loans made or arranged pursuant to a California Financing Law license - Number 603G493.