Find the Lowest Rates on Personal Loans for Business

Updated on July 31, 2020
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What Is a Personal Loan for Business?

A personal loan for business is exactly what it sounds like—a personal loan that the borrower uses for business purposes. Personal loans for business can be especially useful for newer businesses without an established track record. If you’re a business owner in this situation, personal loans for business often have lower interest rates than many other business loans you’d typically qualify for.

Personal Loans for Business Details

Max. Loan AmountLoan TermInterest RatesSpeed
$35K3 - 5 years5.99 - 35% APRAs fast as 1 day
Pros
  • Can be much less expensive than a business loan
  • Great for customers with limited business history
  • Repaid monthly rather than weekly or daily
Cons
  • Reports to your personal credit history
  • Some prefer to separate business from personal finances
  • Limited to up to $40,000

How Do Personal Loans for Business Work?

As previously mentioned, a personal loan for business is a way a borrower can acquire the financing they need for their business in the event they don’t have enough revenue or time in business to qualify for a traditional business loan.

A personal loan can be money borrowed from a bank, credit union, or online lender with terms that dictate that the funds can be used for business purposes. These types of loans are usually term loans, meaning you pay them back in fixed, monthly installments with interest over the length of your repayment period (typically two-seven years).

Note that not all personal loans are allowed to be used for business purposes. Therefore, if you’re looking to take out a personal loan for business, be sure your lender will allow you to apply the funds toward your business.

If so, you can use your personal loan for a variety of business purposes, including purchasing inventory, meeting payroll, or buying ads.

Benefits of Using a Personal Loan for Business

There are three main benefits to using a personal loan for business:

Easier to Qualify For

The reason you’re likely seeking a personal loan for business is because you can’t qualify for a traditional business loan. With a personal loan for business, the lender will consider your personal financial background, rather than your business’s. If you have a good credit score and some income, you’ll likely have an easier time securing a personal loan for business than you would a traditional business loan.

Lower APRs

Because your personal financial history is stronger than your business’s financial history, a personal loan for business will likely grant you more favorable terms than a traditional business loan. You’ll also receive a fixed payment schedule and longer repayment terms.

Flexibility

While certain types of business loans can only be applied toward certain expenses, a personal loan for business usually offers you quite a bit of flexibility in terms of what you can spend the money on.

Drawbacks of Using a Personal Loan for Business

Although a personal loan for business has its uses, you should also be aware of the drawbacks of using this type of financing:

Risking Personal Assets

In order to qualify for a personal loan for business, you may have to put up your own assets as collateral. If you default on the loan, those assets could be seized.

Can’t Build Business Credit

Because the loan isn’t tied to your business, a personal loan for business can’t help you build your business credit score, which may help you secure a business loan in the future.

Small Loan Amounts

A personal loan is typically smaller than a business loan, meaning you might not be able to receive all the funds you need to cover expenses.

Mixing Personal and Business Finances

If you use a personal loan for business, you risk mixing your personal and business finances, which could cause a lot of headaches come tax season. In order to avoid issues, we recommend opening a separate business bank account and enlisting the help of a bookkeeper.

How to Get a Personal Loan for Business

Personal loans for business are granted to borrowers with a strong personal credit history and a steady amount of income.

To acquire a personal loan for business, consider working with a company like Fiona. Fiona works with a large network of personal lenders like Marcus, Upstart, Prosper, and Avant. Simply provide Fiona with your personal information, and they’ll connect you to a lender that makes sense for you.

Loan amounts range from $1,000 – $100,000 on two- to seven-year terms. APRs start at 4.99% but can go as high as 35.99%.

How Do You Apply for Personal Loans for Business?

How Do You Apply for Personal Loans for Business?
The application process for a personal loan for business will depend on the type of lender you’re working with. Many business owners apply for personal loans from their preferred bank, which will typically have a longer application process.

Others will apply for personal loans online. These lenders will have more streamlined and efficient application processes—only requiring a handful of documents in the actual application.

Documents you need:

  • Driver’s License
  • Credit Score
  • Bank Account Number
  • Pay Stubs / W-2s
  • Personal Tax Return

Alternatives to Personal Loans for Business

If a personal loan for business doesn’t make sense for you, there are some alternatives to consider.

Business Lines of Credit

business line of credit is similar to a credit card. It gives you access to a pool of funds to draw from when you need capital, and you only have to repay what you use. Business lines of credit typically come with higher loan amounts than personal loans for business, and they can also be used for a wide variety of business purposes.

A good lender to consider for a business line of credit is Fundbox. Through Fundbox, you can secure a loan between $1,000 and $100,000 with a 12-24 week repayment term. Note that Fundbox requires weekly repayments, and you’ll pay an interest rate ranging from 0.5% to 0.9% of the drawn amount per week.

To qualify for a business line of credit from Fundbox, you only need three months of business history on the books and a 500 minimum credit score.

Business Credit Card

Another common option is to finance your business with a business credit card—particularly a 0% intro APR business credit card. By using a business credit card with a 0% intro APR period, you’ll essentially have a credit card that acts as an interest-free loan—letting you pay down debt while paying no interest on purchases during the introductory period.

Note that once your 0% intro APR period expires, your interest rate will set in at a rate that will depend on your creditworthiness and the market prime rate.

To qualify for a business credit card, you’ll need a strong personal credit score. Keep in mind that business credit cards typically don’t come with high credit limits. Still, a business credit card is a great way to start funding your business interest-free while earning rewards for spending.

Is a Personal Loan for Business Right for You?

Deciding whether or not to fund your business with a personal loan can be a tricky decision. On the one hand, you may be able to acquire more affordable financing than if you went with a standard business loan. On the other hand, you risk mixing your personal and business assets, and putting your personal property at risk. Consider both angles before proceeding.

If you’re ready to take the next step, there are a variety of reputable lenders that can help you get a loan that makes sense for you and your business.

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