As the owner of a small business, it can seem straightforward to blend your business and personal life. But, when it comes to your finances, these two should never mix. Co-mixing business and personal expenses could cause a massive headache during tax time, and you wouldn’t have all the legal protections too.
Startup businesses
Many new companies seek the help of loans for small, startup businesses, which they will use in their new office space, employees, prototyping, and many others. Unfortunately, the majority of the lenders require their borrowers to have an operational business for at least a few months before they consider providing financial assistance.
So, try to use a 0% intro APR (Annual Percentage Rate) business credit card for your initial startup expenses first. However, if this doesn’t work for your need and your financial credentials are good, apply for a personal loan for business instead. This vehicle can give you access to your much-needed cash and, at the same time, help you build up the credit history of your business.
Interest rate discrepancies
Some entrepreneurs apply for a personal loan and business loan at the same time. Then, they realize that personal loan would cost less for their business. Since the entrepreneur’s goal is to spend the least on the business’ capital, this means that you have to go for the better term and interest rate.
A personal loan can, sometimes, have a better overall cost than a business loan, especially if the borrower has excellent personal credentials. While each candidate has a different threshold, this scenario is still possible.
Personal loan vs. business loan
The relationship that you build with the lender when you take on a business loan is such a huge perk that you won’t get if you use a personal loan. Establishing an excellent business credit history with a lender will give you access to better terms and interest rates. A high credit rating will be beneficial when you get to the point that you need funding again. Because of that, it’s better to use a personal loan for a one-off financial problem.