When it comes to financial help; getting business or personal funding is a smart way to secure quick funds. While this depends on the purpose you need it for; both are useful in catering to your personal and business needs.

However, they’re vastly different when it comes to loan processing. If you’re unclear about it, here’s how the personal and business loans processing differs:

Usage of Funds

You can use personal finance for a wide array of requirements, including home renovation, higher education, wedding, travel, and more. In contrast, business finance is designed to cover business expenses such as machinery purchases, employee training, infrastructure expansion, etc.

Documentations

One of the biggest differences between business and personal loan processingis the required paperwork. Here is a list of documents required for business and personal finance:

Business FinancingPersonal Financing
KYC paperwork – PAN card, Aadhaar card, etc.KYC paperwork – PAN card, Aadhaar card
Business proofEmployee’s ID card
Passport-size photographsEmployee’s salary slips
Financial account statementsFinancial account statements
Latest ITR filings, profit and loss statements (last 2 years), income statements (last 2 years)Income proof
Audited financials from the past 3 years 
Other associated paperwork – an article of association/memorandum of association, sole proprietor declaration, etc. 
Income proof 

Additional Read: Top Things to Consider in Order to get Your Business Loan Approved In 1 Go

Eligibility Factors

The personal and business loan eligibility criteria for getting your loan offer approved is different for both options.

Eligibility for personal lending usually depends on a fixed monthly income, nature of employment, age, CIBIL score, professional experience, etc. Only by meeting these requirements, your loan processing will initiate.

However, for a business loan, applying businesses should be profitable for at least three successive financial years. Besides, the company’s turnover must show an upward trend, and your balance sheet must be audited by a registered Chartered Accountant (CA).

Collateral Requirement

Since personal and business funds are unsecured, they generally don’t require collaterals. However, business financing from some lenders can require security deposits.  Tata Capital offers collateral-free business finance at easy eligibility.

The Approval Process

Here’s how the loan approval procedure differs between personal and business lending:

Personal FinancingBusiness Financing
For these, lenders usually look for a stable income and an adequate CIBIL score.   You must also express a viable debt-to-income ratio (the lower, the better) to assure them that you can afford the financing burden.   Various papers, like residential documents, employment certificate, salary slips, etc., are required as proof of employment, income, and identity.These require good credit scores for qualifying.   You must display sufficient annual revenue with at least a few years of being in business.   Numerous business documents, like legal structure, business licenses, cash flow, profitability, etc., are required for approval.

Additional Read: How to Submit Your Business Loan Documents like a Pro and Get Them Approved?

Whichever the Loan, Tata Capital Provides the Best!

Whether you need personal or business financing, we at Tata Capital offer the best-in-class features for both. From compelling business loan interest rates to quick processing to minimal paperwork, our offerings are diverse! Get in touch today to know more.

0 CommentsClose Comments

Leave a comment