Are you wondering as to why you should take a personal loan for your business when almost all leading banks and financial institutions in Singapore offer business loans? The truth of the matter is that getting a business loan can get complicated. Your business will have to meet all the eligibility criteria to be eligible for the loan. Also, it may not always be the most feasible to apply for a business loan.
Find below the best circumstances under which a personal loan is ideal for your business:
Starting off of your business
One of the most important eligibility criteria to take a business loan is that your business should be operational (it is performing). Banks are less likely to approve a business loan on the basis of an idea (your application is not looking so good if your business is still in the ideation stage). No matter how promising your business idea and innovation is, there is no proof of performance. If you are just starting off your business, taking a personal loan instead of a business loan is your best bet.
You do not have a collateral/security/guarantor to offer
More often than not, banks require you to offer a collateral or security against your business loan application. And if you do not have one or if you are in the service sector, you may be required to provide a guarantor. If you cannot satisfy this requirement, your business loan application stands a great chance of being rejected. On the other hand personal loans are largely unsecured and do not have the requirement to provide any form of collateral or security.
You do not want a large loan amount
Business loans are extensively meant for large loan quantum. And since
the amount is large, the loan process will also take a longer time to be
completed. Personal loans can be used for really substantial amount if
that is what you need. You will need to submit lesser number of
documents and get rid of your loan much faster and concentrate on
running your business.
You do not have a set utilisation plan for the borrowed amount for your business
Any bank will require you to provide a detailed plan for how you intend to use the loan amount for furthering your business. If you intend to use the money for various different facets of your business or as and when you require it or if your plan does not meet their expectations, your business loan application can get rejected. However, if you are applying for a personal loan, the bank does not require you to explain the purpose. You have the freedom to use the loan for any purpose (legal of course).
Although there is no dearth of business loans in Singapore, you will need to determine if a business loan is ideal for your business requirement. For the above mentioned situations, a personal loan will work better for your business when compared to business loan.