Business loans are harder to get. In fact in most cases where only a small amount is needed, it is easier and simpler to get a credit card a personal loan (which you then usurp).
A small business loan is convenient and accessible if you have a fantastic credit rating with collateral, as well as if you agree to pay a large portion of the costs yourself. A bank will rarely fully fund a new business. Business loans are only convenient and accessible to people who do not need the money. Even with a good personal credit history, they will not give a loan for a new company, even if the company has a guaranteed contract to purchase a large order.
A business loan offers multiple loan options, but then so does a mortgage, a personal loan and a commercial card account. They are only as inventive and original as the bank wishes to make them. In many cases the true freedom is only offered to people who have long-term established businesses accounts with the bank, coupled with a very good credit rating.
A loan in return of a portion of the business
There are angel investors and venture capitalists who will agree to give you a loan if you give them a portion of the business. In many cases they will only accept a large portion of the company in return for a single one-time payment. They will also expect a large return from their investment and will often make restrictions or impositions on the running of the company.
The disadvantage of business loans
The biggest disadvantage of these types of loans however, is that they are almost impossible to get. Angel investors are far more likely to give to a third world start up company than a first world one, and are going to need solid proof of the businesses future success, even though that proof is impossible (in most cases) to get a hold of.
Banks do offer lower rates of interest for their loans, but they compensate for those lower charges with bigger account fees. Even depositing money into the account manually will cost the business owner money. They do offer lower rates of interests, but the account they attach the loan or overdraft to will no doubt cost a lot of money to maintain.
Some bank loans are eligible for tax benefit, however most debt is eligible for some form of tax relief or benefit (in most countries anyway). Consider hiring a tax attorney before considering business loan tax relief a benefit.
Business loans have a very long application process. You will have to jump through a lot more hoops than you would for a personal loan. The bank will need to verify every item you put into your application and then judge your eligibility for the loan on a points system which will need to be adjusted as new information comes in. This is a very long and lengthy process.
The details that a bank needs are cumbersome and will often take you a long time to find and prove. You will need to be 100% accurate in every item of the application form and with every number you give them. This requires a lot of checking and proving which will take you a long time. Plus there are times when oversights in your accounts may damage your chance of success unfairly.
They are always going to give preference to businesses which have a long standing account with them. Unless you are one of those people, you will have to beg and plead with the bank in order to get your business loan. The many prerequisites needed for a business loan are often too difficult to obtain. Quite often the application process is nothing more than a big waste of your time and a kick in the teeth to your credit rating.
A business loan will often ask for collateral, which they will be more than happy to take from you at the drop of a hat. A business loan is easier to revoke and demand sudden payment upon. With a mortgage they have the safety net of the house its self. They may repossess the house and make their money back. This means that they may give many warning before taking the house.
With a personal loan the safety net is often the fact that the loan is fairly small, and if needs be the bank can draw out the process of getting the money back. With a business however the tide may turn quickly. Missing a payment may be an indication that the business is on a quick decent. The bank will have to move fast and repossess your collateral as quickly as possible before it disappears.