New entrepreneurs are often confused when choosing between a business loan and a Syndicate Bank personal loan. While there is no easy answer, we help you choose the right loan product by listing both of your features and benefits.
1. Easy approval
Personal loans can be easily approved as long as one has good credit and can demonstrate consistent cash flow. Businesses applying for a personal loan must have a sufficient amount of credit-to-income. In the absence of good credit, one can go for secured loans that require a mortgage commitment.
When it comes to business lending, the best credit is the first condition to qualify for the same. Lenders can sometimes claim their loans and business. Businesses may also need to demonstrate sufficient annual revenue and number of years in the industry. Some online lenders can offer expensive business loans to entrepreneurs who can easily fit the process.
2. Interest rates
Personal loans are designed for financial institutions to help meet personal needs such as a wedding, home improvement, or other urgent financial needs. The interest rate associated with personal loans is very high. The monthly installments can be calculated with a Personal Loan EMI Calculator Personal loans may not be suitable for entrepreneurs as they may end up at higher financial costs especially if their business is in a new phase. This is where business loans can help them.
3. Short Time
Personal loans come with a short term in respect of repayment. Business loans, on the other hand, tend to be longer. Therefore, entrepreneurs may need to pay more in the form of EMIs per month when opting for a personal loan. This can affect the cash flow of a business and hamper its initial growth.
4. Conditions for Future Borrowing
Funding a business with the help of a personal loan can mean higher interest rates and EMI-related payments. In such cases, there is a high risk of default which may cause future cash flow problems. That is why many business owners find it difficult to establish trustworthiness and to obtain better credit terms for personal loans. This shows that business owners are better off with business loans.
5. Expenditure
If business owners borrow money, they may end up using it for emergencies. This could indicate a lack of ethics and misuse of available funds especially if they are used for situations that are not related to business growth. A business loan can ensure that entrepreneurs do not have to deal with such problems.
6. Implementing Government Strategies for Business Growth
For businesses that qualify for government debt guarantee schemes, they can easily get unsecured high-end Rs. 1 Crore. Therefore, a business loan with a better interest rate may be more in line with the needs of the business compared to a personal loan. A personal loan of Rs. 1 Crore can be dangerous for a new business. Although personal loans are available immediately, as long as the basic eligibility criteria are met, these are best suited to address the urgent financial need. Wise entrepreneurs prefer business lending instead of falling into the trap of personal loans.
7. Purpose of Loans
The purpose of the loan and its urgency may influence the decision-making process when choosing a business loan or personal loan. If the demand for loans is very high but the business is doing well, there is a better chance of getting a business loan at a good interest rate. However, in the case of an urgent financial need, personal loans can be easily obtained compared to a business loan.
Conclusion:
As stated above, there is no direct formula to choose one among the two choices but you can always decide upon by taking the above parameters and your situations into considerations.