Monday, April 12, 2021

Business loans are harder to come by than personal loans

Words Business loan spelled out by scrabble tiles on a table

Finding someone, whether an individual or lending institution, to loan you money is never easy, but business loans tend to be much harder to secure than personal loans. For the most part, personal loans are typically smaller amounts than business loans, and that is perhaps one of the primary reasons that it is such a feat to get your hands on a business loan.

Why Business Loans are Harder to Get than Personal Loans

Financial institutions such as banks are money making businesses which is something to remember when  looking at the perimeters of lending money. Firstly, there are far more individuals seeking personal loans than business finance, therefore banks are inclined from a business perspective to service this part of the market stronger and with fewer restrictions than the business loan seeking market. Then there’s the possibility of a business not working out, which is a high probability for start-ups especially with the success versus failure rate leaning favorably towards failure than success. Again, in this instance the decision that makes business sense for a lending institution is to put more restrictions on business loans so as to protect their investment.

The Future of Business Loans

It’s rather unfortunate that lending institutions do not look upon other businesses looking for business loans far more favorably, considering that banks themselves are a business are thus should be in a better position to understand the financial imperative for any business to survive. For if there was more funding, there would perhaps be less failure, or at the very least there would be an incentive from business people to work harder at their businesses for the benefit of the business and the financial institution that has taken a chance at funding the business.

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