Financing a business usually means organising a loan. Using a home as security against a loan is generally the most cost-effective way of borrowing, according to the Sydney Morning Herald. A separate loan can be arranged for borrowing but the interest rates for this will be higher than a secured loan or mortgage.
Borrowers should bear in mind that the interest on business or investment loans is tax deductible, but that this is not the case with private loans. Therefore, business owners should always pay off private loans first to save the most money.
It’s a good idea to separate business and private loans wherever possible. This will enable business owners to maximise repayments on private loans, reducing non-deductible interest more quickly. Principal repayments made on a loan comprising both business and private components will reduce the entire loan, rather than the non-deductible portion first, so the loan will cost more overall.
Source: http://www.smh.com.au/small-business/rules-for-borrowing-in-business-20130401-2h2dm.html
