Difference between Business Loans and Corporate Loans

Being a business owner is no joke! You have to look after your business’s functioning while ensuring profitable operations. On top of that, you constantly need to manage your funds for maintaining your business.

As the market dynamics keep changing, taking care of daily expenditures, or working capital can be particularly challenging. This is why most business owners turn to financial institutions for a business loan. But have you heard of a corporate loan? Yes, a corporate loan is different from business finance!

Here’s the difference between business finances and corporate loans.

  • Purpose of the loan 

Business loans are given to a businessman or a company for a fixed interest rate for a predefined term. You can avail one for funding a new venture, expanding a business, or purchasing equipment. On the other hand, corporate loans are sanctioned for existing industrial houses/businesses that require more funding or working capital.

  • Eligibility for the loan 

A company can avail of a corporate loan only if it has been in business for five or more years and has made financial profits in the last two years or more. However, there are no such criteria for qualifying for business loan eligibility. The minimum eligibility for business finance requires the business to date back to three years or more.

Also remember that a good credit score, income tax returns, and the repayment status and records of any previous loan can also affect your loan eligibility. 

  • Secured or unsecured? 

Typically, a loan for business is an unsecured one. In other words, you need not offer any collateral or security in return of the loan to the financial institution. But the business needs to have a decent CIBIL rating and good income tax payment record.

Corporate loans, on the other hand, can be secured or unsecured. Unlike an unsecured loan, you have to submit collateral or security for a secured loan.

A secured corporate loan will allow you to enjoy lower interest rates and longer repayment terms. However, unsecured loans come in handy in case of an emergency. You must have a high credit rating to get this loan type. 

  • Tenures and interest rates 

Business loan interest rates remain constant throughout the loan tenure and are pre-specified. Most financial institutions offer highly competitive interest rates.

Moreover, borrowers get flexible loan terms of 12 to 36 months for business finance repayment. So, the business loan EMI or monthly instalments can be easily paid over an extended loan tenure. Along the same lines, most financial institutions provide the flexibility of loan terms from 12 to 48 months, and it may go up to 5 years.

As for the corporate loan interest rates, it ranges between 18% to 25%, depending on your credit score, loan tenure, company records, and much more. Through and through, we have highlighted the key differences between a loan for business and a corporate loan.

Several financial institutions have flexible repayment terms and provide quick disbursal of funds. Whatever your business needs are, you can always turn to a reputable financial institution to help you breeze through a financially tough spot.

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