When to Finance Your Business Using a Personal Loan
Itâs not common knowledge that you can actually use a personal loan for business purposes. Personal loans are especially helpful for new businesses without established business histories, and often have lower interest rates than many business loansâmaking them a great option for young companies looking for financing.
3 to 5 years
5.99 - 36% APR
As little as 1 day
If youâve got a great personal credit score, personal loans for small business could be an excellent way to finance your new venture.
Youâll need to have a credit score of 580 or above to consider it a viable option. And again, nothing about your business will get considered in your application.
**Based on past Fundera customers.
For plenty of entrepreneurs, getting that first stage of financing can seem like an impossible climb.
How can you start your business without having enough funds?
But Funderaâs marketplace offers a solution for business owners who donât have much business history or finances yet:
Using personal loans for business.
Itâs important to understand the difference between personal loans âfor businessâ and traditional business loans, and to be aware of what personal loans for business require.
Letâs get started.
Personal loans for business depend a whole lot on your personal credit scoreâyour businessâs financial track record doesnât matter.
After all, your lenders are making a loan to you, the business owner, and itâs your responsibility to repay that loan.
What does this mean for you?
Whether youâre using those funds for your business or something else doesnât affect that model.
For small or new businesses that donât have significant financial history yet, personal loans might just be a perfect fit.
Personal loans for business are only really an option if youâve got a strong credit scoreâthatâs the most important part of the loan application.
One great thing about personal loans?
Their payment structure is easy to understand.
No hidden fees, no complicated documentsâjust you, a lump sum of cash, and a fixed monthly payment.
There is a charge you should be aware of, though: the closing fee.
Itâs also pretty straightforward, though.
Subtract the closing fee from the loan amount youâve been approved for, and thatâs how much capital you can actually expect in your bank account.
Say you apply for a $5,000 loan, but thereâs a $250 closing fee attached.
Once you get funded, youâll only receive $4,750 in your bank accountâbut youâll have to pay interest on that original $5,000.