People turn to personal loans for a variety of reasons, such as consolidating debt, auto repairs and paying for medical debt.
But there’s something else you need to know: you can also use a personal loan for your small business.
Despite the name, this type of loan could be just what you need to take your business to the next level. It can be used for expenses such as:
- Equipment (things like printers, copiers, kitchen equipment, packing tables, etc.)
- Office space (either to lease or purchase)
- Marketing and advertising (print, digital, promotions, etc.)
If there are business expenses you don’t currently have the capital for but could ultimately help the company grow, a personal loan could be a viable solution.
Take, for example, the Campbell Cheese Shop in Brooklyn, New York, which was opened by two sisters using a personal loan from Discover.
Small Business Loan vs. Personal Loan?
The moment you realize you need cash for your business, your mind may turn to a small business loan. After all, this type of loan is designed for companies just like yours.
There are times when a small business loan makes the most sense – such as if you need to borrow hundreds of thousands of dollars – but that doesn’t mean it’s always the right solution.
The biggest problem with a small business loan is the stringent requirements. Not only does this hold true with the eligibility requirements, but it also comes into play during the application process. Here are some of the biggest challenges:
- Lengthy application process that can eat up hours of valuable time
- Documentation requirements, such as providing a business plan, tax returns, references, and financial data
- It can take a long time to receive the funds (even after you get an approval), as the entire process can take up to 90 days.
- There are as many as seven types of small business loans, so just choosing the right one for you could take some time.
Although it’s common to initially assume that a small business loan is the best choice, you may find that these requirements are difficult to meet or will take longer than you want to get your business moving.
Is a Personal Loan Application Process Any Better?
The short answer is that an application and decision with Discover Personal Loans can happen in one day.
With a personal loan, you don’t have to jump through nearly as many hoops. Instead, it’s much easier to acquire a loan in a timely manner (and without all the hassles mentioned above).
Some of the primary benefits of a personal loan for business use – especially when compared to a small business loan – include:
- Simplified application process that can be started online or over the phone within a matter of minutes
- Fewer documentation requirements (i.e. a business plan)
- Same day decision (not always but most of the time)
- Fewer complications, with the main decisions being the repayment schedule and amount to borrow
The simplicity and convenience alone is reason enough to learn more about using a personal loan for your business.
How to Make a Final Decision
Now that you understand that you can use a personal loan for business, you need to decide if this is right for your company at the present time. As you compare this option to a small business loan, ask and answer the following questions:
- How do you plan on using the funds?
- Do you need the money in the immediate future, or can you afford to wait?
- How much money do you need to borrow at the present time?
- Have you collected all the information you need for the application?
- Which type of loan is most affordable over the long run?
By answering these questions, while also consulting with a lender for each type of loan, you’ll find yourself in position to make an informed and confident decision.
It’s a myth that you can’t use a personal loan for your business. Despite the name, you can use the funds for a variety of business expenses. Also, there are several lenders out there but getting a personal loan from a bank can be a smart choice.
Your first instinct may be to apply for and secure a small business loan, but you should know you have other, potentially simpler options. You may find that the benefits and convenience of a personal loan make it the right choice for your company.