Bugis Credit Pte Ltd is a licensed moneylender (License No. 25/2024) listed in the Registry of Moneylenders, under the Ministry of Law in Singapore.

Business Loan Vs. Personal Loan: Can Personal Loans Help Businesses?

Business Loan Vs. Personal Loan

If you need to add to your business expansion budget, you can always borrow from the wide selection of financial products in Singapore. Virtually every bank offers a personal loan or business loan.

At face value, you might think that personal loans work best for self-spending and business loans for company expansions. However, you’ve heard some small and medium enterprise owners use a personal loan to expand their business.

To help give you clarity, here is a post that compares a personal loan and business loan against each other. Take your time to learn all about it and use it to your advantage.

Business Loan Vs. Personal Loan

A business will need a bigger cash value to expand. Therefore, a personal loan’s six-month-salary financing might fall short for a business’ new equipment purchase. This detail is only one major difference between the two. Here’s a handy table for your easy reference.

Loan Type Loanable Amount Interest Rates Loan Tenure Ease of Application Loan Disbursal
Bank Personal Loan Six months your monthly salary 5-7% APR 1-year Online or offline with relatively quick approval Bank account
Bank Business Loan Every owner/co-applicant’s six months of salary or a high final loan limit 2-7% APR 1-6 years Subject to credit investigation and bank evaluation Company Bank Account

Here are short summaries about each category:

  • Loanable Amount: This is the total monetary value banks provide for a personal loan and a business loan.
  • Interest Rates: This is the added “service charge” for both business and personal loans. In most cases, both business loans and personal loans have an annual percentage rate (APR)
  • Loan Tenure: This is your loan’s repayment length. Going beyond the loan tenure leads to compounded interest rate charges. The added charges will accelerate your debt accumulation.
  • Ease of Application: Today, banks and financial institutions have adopted modern online application facilities for personal loan and business loan applicants. However, some financial institutions may still prefer pen-and-paper branch applications.
  • Loan Disbursal Method: Your loan disbursal method can go straight to your bank account, depending on your bank product terms. Alternatively, some financial institutions may prefer that you visit their branch to claim your check.

Both a personal loan and business loan have respective benefits and shortcomings. Therefore, your priority is to use them to your situation’s benefit. To do this, you can use the following list of pros and cons for both personal loans and business loans.

Business Loan Pros and Cons


Larger Loan Amounts

Business loans have larger loan amounts because enterprises need higher than an individual’s six-month salary figure. Many businesses need expansive income to open new branches, buy new equipment, and hire and pay new personnel.

Banks and financial institutions consider every company loan applicant’s credit scores and incomes. Alternatively, banks might set business loan amount limits. For example, if two business owners have a S $400,000 combined income, banks can only provide S $200,000 if this is their business loan product’s limit.

Limited Liabilities

Business owners taking out personal loans are completely liable for the personal loan until they fully repay their debt. However, a business loan places liabilities on both owners and their business entity.

For example, if a business owner defaults, the lender can liquidate a portion or all the business assets. In doing so, business owners are free of any liabilities or deal with small repayments at the very least.

Lower Interest Rates

Business loans have lower interest rates because banks consider your business as collateral. In addition, your cash flow, financial projects, and existing cash reserves allow you to offset your possible default in the future.

However, loan interest rates depend on the number of borrowers and business assets. Therefore, an individual business owner might face higher loan interest rates than a partnership or established limited liability corporation.


Business as Collateral

Business loan approval and disbursal take much time because lenders perform intensive credit and asset investigations. Doing so helps them measure your business’ default risk, management style, and future projects. In addition, they place accurate equity values on your business assets that they can claim if the business defaults.

All these investigations will merit you with lower business loan interest rates. However, your low rates are due to your business assets and potential value acting as the loan’s collateral.

Relatively Short Loan Term

Business loan terms for most small companies require you to pay everything plus interest within 1-2 years. If you’re a preferred borrower, you’re lucky to have a 5-year loan term.

Therefore, if you can handle these relatively short loan terms, a business loan can perfectly work for you.

When Should You Use Business Loans?

Business owners must always use business loans and avoid using a personal loan for business matters. Doing this helps them achieve the following:

  • Separate personal expenses from business expenses
  • Use amounts that can make a huge impact on business expansion or productivity
  • Avoid limited funding by taking on a personal loan for business needs
  • Get lower interest rates for high loan amounts
  • Have enough collateral to take on higher loan limits
  • Use every business stakeholder’s personal credit score to their benefit
  • Have limited liabilities in case of business loan defaults
  • Avoid negotiating higher personal loan amounts with banks

Personal Loan Pros and Cons


Faster Approval

Unsecured personal loans can take only a single day to receive bank approval. Doing this is possible because the lenders won’t investigate the business owner’s backgrounds. If they can establish their income and fulfill all requirements, they can get faster approval rates.

Alternatively, even if business owners decide to use their personal assets as collateral, the credit investigation is much faster than their procedures for a small business loan.

Quick Loan Disbursal

Bank personal loans require you to sign up for an account because they will likely disburse your loan amount there. Virtually every personal loan in Singapore receives quick loan disbursal in a bank account after approval.

However, make sure to talk about loan disbursal procedures with a bank representative. Doing this helps borrowers schedule their finances and create accurate budgets.

No Collateral

A personal loan from banks and licensed moneylenders requires no collateral. Doing this speeds up the application process and grants immediate loan releases. However, borrowers need a high credit score to comply with bank requirements.


High Interest Rates

Unlike a small business loan, personal loans have a smaller loan limit and higher interest rates. Banks are taking a high risk when working with customers who have no collateral. In addition, a high credit score will still leave you with a higher personal loan interest rate compared to rates from small business loans.

Higher Regular Payments

Business loans will have higher regular payments than personal loans. However, if you relate your total business loan amount and repayments to personal loans, the latter has a smaller loan limit and higher regular payments.

Furthermore, personal loans have higher penalty fees and interest rates. Failing to pay within the loan tenure can leave you with high penalties and compounded interest rates.

When Should You Use Personal Loans?

A personal loan has many uses. However, small business loans are still the best financial products for expanding your brand. The best time to use personal loans are the following situations:

  • Medical emergencies
  • Sudden unemployment
  • Delayed paychecks
  • Personal use funds
  • Cash for investing
  • Balance transfers (if it has a lower interest rate)
  • Bridging loans (if it has a better interest rate and terms)

On the other hand, some borrowers have found success using personal loans to jump-start their startup business. Truthfully, personal loans are ideal for zero-year startups because they have no financial records and cash flow. Once they reach their first year and fully pay their debts, business owners can finally use a business-friendly financial product.

Getting Business Loan Applications Quickly Approved

Any business with more than a year of establishment in their respective industry will find it easy to get their business loan application approved. Here are five ways to get your application for business loans quickly approved.

Excellent Personal and Business Credit Rating

Whether you’re applying for a personal or business loan, having an excellent credit score matters. If you have an excellent personal and business credit rating, you can expect a smooth small business loans application.

The next items help banks measure your business’ credit rating consistency.

Fulfills All Minimum Earning Requirements

All banks have minimum cash reserve requirements for businesses. These earning requirements include business expenses and yearly profits. However, most banks might have additional requirements. Therefore, borrowers should ask them about their specific business loan requirements.

Years Established

Most banks and financial institutions won’t service businesses less than a year in business. However, businesses with more than a decade under their belt have the best chances for loan approval. On the other hand, businesses established for a year can apply and get their loans approved.

Current Cash Flow

Cash flow refers to your average sales and expenses per year. Often, your one-year cash flow report is enough for most loan applications. On the other hand, some banks might need more than a year of cash flow reports.

Financial Projections

Banks always look for profitable opportunities. Therefore, businesses that can show them realistic financial projections for new ventures or expansions have the best chance of business loan application success.

Industry Risk Level

Every business embodies a risk level. Plus, every market is a solitary economic basket. Some banks won’t invest in loss-heavy businesses during market recessions. Therefore, you might have rejected loan applications despite fulfilling your requirements and having excellent financial stature.

How to Qualify For Personal Loans

A personal loan has lighter requirements than banks. Therefore, borrowers can qualify for personal loans easier than business loans. Here are two easy qualifications you must fulfill to get personal loan approval.

Excellent Personal Credit Rating

You need only your personal credit scores to qualify for a personal loan. Plus, good credit scores guarantee personal loan application success with zero collateral requirements.

Stable Income and Employment

Banks will look into your personal credit score. However, they will heavily consider your personal income and employment stability. Personal loan applications are easier for employees than business owners. Business owners will face credit investigations regarding their business’ cash flow.

Both Business Loans and Personal Loans Have Their Place

Business loans give you the following:

  • Larger cash for expansion
  • Lower interest rates
  • Longer payment terms
  • Stricter requirements
  • Relatively longer loan requirements

A personal loan provides you with the following:

  • Faster loan disbursal
  • Unsecured loans with fewer requirements
  • Fast approval

Licensed moneylenders are an excellent alternative to bank loans. You won’t need to fulfill high credit scores for a licensed moneylenders personal or business loans. Visit Bugis Credit today and apply for a loan now!

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