Should you consider Personal Loan for business use?

When it comes to financing your entrepreneurial dreams, the first thought that would come to mind is a business loan. A loan for business is offered to established companies and often has a minimum turnover requirement. Along with this, business loans are offered after considering the business profile, collateral provided, loan purpose, etc. However, it is often difficult for a budding entrepreneur to qualify for a business loan.

A personal loan is not something you consider while trying to find out how to raise funds for business. As an unsecured loan that you can use for any purpose you deem fit, personal loan use may also include business needs. Here are a few reasons why businesses may have to opt for it over loan options for business.

Challenges of getting a business loan 

Availing of a business loan can be a challenge as banks are particular about various factors, and not every business may be equipped to fulfil it.

Lack of collateral

Business loans are secured with collateral. Small and new businesses may struggle to support their business loan application with sufficient collateral. 

Poor credit

A good credit score is built over time, and a new or small business owner may not have built it yet. First, they will have to build a good personal credit score by maintaining a spotless credit history. If time is of the essence for you, then hoping for a business loan with a below-par credit score is not advisable.

Low income 

The income flow of your business indicates your repayment capacity. A loan for business has a higher income requirement. 

Low capital investment 

The business profile is vital for approving a business loan. With the low capital investment, the business profile often looks weak, leading to rejection of the business loan application.

Looking beyond business loans

One of the most convenient and viable financing options for a new venture would be to avail of a loan for personal use. Let's see why,

Unsecured loan

A personal loan is unsecured, so no collateral is required. This is the ideal way when you are wondering how to raise funds for business, particularly a new one, that may not have amassed any significant assets.

Eligibility

Self-employed business owners applying for a personal loan should provide address and identity proof, banking and income proof, ownership proof and business proof. Business loan applicants may also need to provide future business plans and profit projections. Eligibility criteria and documentation requirements for a personal loan are comparatively liberal. 

Purpose

Unlike loan options for business, a personal loan applicant doesn't need to specify any utilisation plan for the loan. A personal loan use could be any purpose the borrower chooses, which may also include business purposes.

Conclusion

Small business administration can be a challenge, which is further stressed when you struggle to fund your business. An IDFC FIRST Bank personal loan, when used for business, can ease these concerns and ensure that you continue to pursue your entrepreneurial dreams. Furthermore, the bank offers a personal loan of up to Rs 1 crore at interest rates starting from 10.49%.

If you are looking for financial assistance to kick off your business, an IDFC FIRST Bank personal loan can be an ideal option.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.