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small business planning

Personal Vs Business Loans

small business planning

There’s nothing quite like being your own boss. Who doesn’t want to set their own schedule, approve their own vacations, or decide that every day is casual Friday? More importantly, starting a business means every dollar your hard work earns is yours.

But being your own boss is expensive. Like the saying goes, it takes money to make money. If you don’t have cash on hand, how do you get it?

Sure, you can borrow from a bank, but this can mean filling out a lengthy application and possibly having to put up your savings or even your home as collateral. Unless you have a perfect business plan and pristine credit, there’s no way of promising that the bank will end up loaning you cash at the end of it all. One other way to raise the money you need is by taking out a personal or small-business loan.

What Is a Personal Loanmoney in wallet

Many companies are now offering unsecured personal loans. This means that you don’t need any collateral, or something you need to sell to borrow cash. Instead, the company lending you the money looks at your credit score, your income, and sometimes other factors, to decide if they’ll approve your application.

You can take out a personal loan for anything. This includes funding your small business, but there is no limit on what you spend the money on. If your application is approved, you can spend the funds on whatever you wish.


Unlike applying at a bank, where it can often take weeks to find out if you’re approved and get your cash, an online personal loan application can often be approved in minutes and many times you can get the money in a matter of a few business days.

Many personal loans feature a fixed interest rate, making your payments predictable, and you often have between three to five years to pay them back.


Unless you have excellent credit, the amount you can borrow with a personal loan is limited. When you apply, the lender assigns you a risk rating. Borrowers with a higher risk rating have access to less cash, and they’ll have to pay higher interest rates.

Some lenders won’t let you make extra payments to pay off the loan early. This means you have to pay back the full interest amount, which can total to thousands of dollars more than what you borrowed.

Because all companies are different it is important that you take a hard look at the company you are considering doing business with and consult with a financial advisor or lawyer if you have any questions or concerns.

What is a business loan

calculator and business plan

Unlike a personal loan, one of the requirements for obtaining a business loan is that you must own your own business. The lender will look at your business, as well as your personal credit history and decide if they’ll approve your application. If they do, the money is sent to your business account and you can spend it however you want.


Like personal loans, many business loans are offered as unsecured, which means that you don’t need to have any collateral to get approved.

Another key advantage of business loans over personal loans is that the amount you can borrow is typically higher. Since lenders look at your business income, they may be more willing to give you a larger amount of cash, to invest in your company.

These loans also help your business establish its own credit history. This can help your business get approved for lower interest rates in the future, even if you make the decision to apply at a traditional bank.


Most unsecured lenders will require someone to sign for the loan, tying their personal credit score to the application. Business loans often have strict requirements for your business as well, so people trying to build a company from scratch will find it harder to get approved.

Business loans tend to have shorter repayment terms, often between three and thirty-six months, which means much higher monthly payments.  In fact, some lenders require daily payments for their business loans, where what you owe is deducted automatically from your business account every day.

Again, because all companies are different it is important that you take a hard look at the company you are considering doing business with and consult with a financial advisor or lawyer if you have any questions or concerns.

Sell Your Settlement Payments for A Lump Sum

Whether you take out a business or personal loan, you’re still borrowing to invest in your business. Going into debt to build a company isn’t necessarily a bad thing, but it means you’ll likely pay thousands of dollars in interest payments on top of what you borrow, extra cash that you could be reinvesting in your business instead.

You need money to make money, but what if you can access that money by selling your own future payments? If you’re receiving payments from a structured settlement, J.G. Wentworth may be able to purchase them and give you a lump sum instead. This isn’t a loan, it’s cold hard cash you can spend today. Since it’s your money, you never have to worry about paying it back.

If you have a structured settlement and want to see how you could spend that money to invest in your business, let us know. We’ll give you a free quote on how much we can offer for your policy, so you can go over your options with a financial advisor and decide if selling your future payments makes sense.


This blog post is intended for informational purposes only. J.G. Wentworth does not provide financial, legal, or tax advice. Please contact an appropriate advisor for such services.

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