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Loan for self-employed entrepreneurs: private or commercial?

Are you the leader of a self-employed company and want to borrow money, either for private purposes or for your business?

What alternatives do you have as an independent entrepreneur? Should you prefer to borrow the money on your own name or on the company’s behalf? We compare the two solutions.

Personal loan or corporate loan?

Anyone who runs their own business has the option of borrowing money either on their own behalf or on their company’s behalf. These are two different approaches with different specificities:

  • Loans in your own name: This is called personal loan or even consumer credit.
  • Loans on behalf of the company: This is called a business loan or an SME loan.

The corporate loan

This form of loan makes it possible to cover any project or need for quick liquidity within the company . In certain cases, and especially for self-employed entrepreneurs, the border may blur. For example, this is the case with a vehicle that is used both commercially and privately. No matter what need to make a credit request on behalf of the company means:

  • That the borrowed money is basically used in the context of corporate financing.
  • That high sums can be borrowed: from CHF 10,000 and up to CHF 30,000,000 .
  • The repayment period can be chosen from 12 to 84 months.
  • To benefit from a sometimes cheaper interest rate.
  • That the dossier analysis requires more documents than private credit.
  • Sometimes a longer processing time has to be accepted.

For example, an SME loan from CHF 200,000 to 60 months with a 4.8% interest rate will incur a monthly installment of CHF 3,746, which includes amortization and interest.

Consumer credit

This form of loan concerns the financing of all private projects. For self-employed persons or managers of a smaller SME , a personal loan can also easily be used to finance the company ! Generally speaking, this solution means:

  • Free use of the money received
  • The loan of smaller amounts: from 3’000 CHF to 300’000 CHF
  • The choice of a payback period of 12 to 84 months
  • An interest rate adjusted to the borrower’s budget (a better budget means a lower interest rate)
  • Simplified processes: Delivering fewer documents, a faster decision, …

For example, a consumer loan of CHF 40,000 to 60 months with an interest rate of 5.8% means a monthly installment of CHF 766, which includes both amortization and interest.

Which solution should be chosen?

In some cases, it seems obvious that one of the two alternatives is more rewarding, but often the choice is not that easy. The simplest solution for the borrower is often to contact a specialist who works in both personal and corporate loans. You can also request a personal loan from the same provider for individual use (including for your company) . It should also be noted that there are alternatives to traditional credit. For example, a company can finance the purchase of a means of production through a lease or sustainably increase its liquidity by factoring .