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Personal Business Loans: Compare Financing Options

Updated on October 18, 2024
Jackie Veling
Written by 
Lead Writer & Content Strategist
Kim Lowe
Edited by 
Head of Content, Personal & Student Loans
Fact Checked
Jackie Veling
Written by 
Lead Writer & Content Strategist
Kim Lowe
Edited by 
Head of Content, Personal & Student Loans
Fact Checked

Small-business owners have plenty of hurdles to clear, and one of the highest is finding startup financing. If your business is too new to qualify for a traditional business loan, an unsecured personal loan may make sense as long as you receive an affordable rate.

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Personal Business Loans: Compare Financing Options

Lender
NerdWallet Rating
Learn more
4.0
/5
Best for Borrowers with fair or bad credit

8.99-35.99%

$2,000-$50,000

660

5.0
/5
Best for Borrowers with fair or bad credit
Fast funding
Flexible payments

6.70-35.99%

$1,000-$50,000

None

RocketLoans

Rocket Loans

4.5
/5
Best for Borrowers with good or fair credit
Fast funding
Rate discount

8.71-29.99%

$2,000-$45,000

640

4.5
/5
Best for Borrowers with good or fair credit
Secured loans
Wide range of loan amounts

6.99-35.99%

$2,000-$50,000

600

Achieve

Achieve Personal Loans

4.0
/5
Best for Borrowers with good or fair credit
Rate discount

8.99-29.99%

$5,000-$50,000

640

Lending Club

LendingClub

4.5
/5
Best for Borrowers with good or excellent credit
Flexible payments

7.90-35.99%

$1,000-$50,000

600

Laurel Road Personal Loan

Laurel Road Personal Loan

4.5
/5
Best for Borrowers with good or excellent credit

8.99-23.35%

$5,000-$45,000

680

Can you get a personal loan for a business?

A personal loan is money borrowed from a bank, credit union or online lender that can be used for any number of purposes, including to fund a business.

Most personal loans are unsecured, which means they don’t require collateral, and you pay them back in fixed monthly payments — typically over two to seven years.

Some lenders may not allow you to use a personal loan for business expenses, so it’s always best to check before you submit an application. This information may be available on the lender’s website or you can call their customer service department to confirm.

Benefits of using a personal loan to start a business

Flexibility: As long as your lender has no rules against using a personal loan for your business, you can use the money however you want, including to purchase equipment and inventory, stock up on office supplies, kickstart your marketing efforts or cover other costs.

Low rates: Depending mostly on your credit score, personal loans can have lower annual percentage rates than other financing products — such as credit cards, if you carry a balance — saving you money over the lifetime of the loan. They also have fixed payments that ensure your loan is paid back within a certain time frame so you'll avoid compound interest (interest on top of the original interest).

Easier to qualify: If you’re just starting your business, you may have more luck qualifying for a personal loan than a business loan. When underwriting traditional business loans, lenders look at your company’s revenue and time in business, along with your personal credit score. For a first-time business owner seeking to fund a new business idea, you won’t have some of the history that small-business lenders are looking for.

Personal loans are underwritten based primarily on your credit score and income. That means you can include other income sources — like earnings from a 9-to-5 job or rental properties — to supplement the income you’ll earn from your new venture.

Fast funding: The majority of personal loans are funded within one week of approval, though if you choose to apply with an online lender, you’ll likely receive funds by the next or even same business day. This may be faster than some traditional business loans. For example, the process of applying for and receiving an SBA loan can take 30 days to a couple months.

Drawbacks of using a personal loan to start a business

May not receive a full tax deduction: Interest paid on a personal loan is typically not tax deductible, unlike interest paid on business loans. However, there’s an exception for when you use a personal loan to cover business expenses. To get the full deduction, you’ll need to make sure no portion of the loan is used for another type of expense.

Personal credit or assets could be at risk: If you take out an unsecured personal loan and fail to repay it, your credit will take a hit. This may make it harder to access affordable financing in the future. If you take out a secured personal loan and tie it to an asset like your car or home, the lender can seize that asset if you default.

Small loan size: Personal loans tend to have smaller loan amounts — ranging from about $1,000 to $50,000 for most lenders — than business loans. For a small startup, the size might be just right, but if you own a more established company or plan on making big purchases, you’ll want to look for loans that offer more financing.

Shorter repayment terms: Most personal loan terms range from two to seven years, so if you need a longer repayment term, you’re better off looking at other small-business financing alternatives. SBA loans tend to have the longest repayment terms, ranging from 10 to 25 years.

When it makes sense to get a personal loan for business

You might consider a personal business loan if you haven’t been in business long enough to qualify for a traditional business loan and you’re looking to borrow less than $100,000.

A personal business loan might also be a good choice if you need money soon and can’t wait the time it takes a traditional business loan to process.

Compare APRs with other financing options to make sure a personal business loan is the least expensive choice.

How to get a personal loan for business

1. Pre-qualify with multiple lenders

To get a personal loan for business, you’ll need to apply with a bank, credit union or online lender.

Some lenders, especially online lenders, let you pre-qualify before submitting your application. That means you can see potential loan terms, including what interest rate you may qualify for, without submitting to a hard credit check, which can temporarily lower your credit score. Consider pre-qualifying with multiple lenders to find the best rate.

2. Submit your loan application

Once you’ve decided on a lender, it’s time to complete your application. You’ll need to supply information like your personal details and contact information, your Social Security number and any supporting documents that verify employment and income.

Approval decisions can be instantaneous or take a few days, depending on the lender.

3. Get funded

Once approved, you’ll sign the loan documents and receive the funds in your account, sometimes as early as the same or next day. Once funded, make a plan for how you’ll manage your payments over the course of the loan. Missing even one payment can trigger a late fee and a hit on your credit score, which may make it harder in the future to access affordable credit for your business.

Alternatives to personal business loans

Small-business loan: If you're an established business and want to explore other options, a small-business loan may be a smart choice. When reviewing your application, small-business lenders prefer to see at least two years of operation, though some online lenders may only require a minimum of six months.

Business line of credit: A business line of credit is a type of small-business loan but with more flexibility. It works like a credit card, letting you borrow up to a certain limit and then paying interest only on what you borrow, so it’s ideal for business owners who aren’t sure of the scope of their financial need.

Business credit card: A business credit card offers revolving credit that’s ideal for short-term expenses and may be easier to qualify for than a small-business loan. Business credit cards also offer rewards, like cash back or travel points, and can help keep your business and personal finances separate.

Last updated on October 18, 2024

Frequently asked questions

  • The best loan will depend on your business’s needs. If your business does not have two years or more of history or revenue, a personal loan can make sense as a potential financing option.

  • You can typically use funds from a personal loan for almost anything, including to fund your business. It's best, though, to research the lender to determine any loan use restrictions it has before you submit an application.

  • To get a personal loan for business, you will need to apply and be approved with a lender. Approval is typically based on your credit, and once approved, you can receive funds within one week.

NerdWallet verified icon

How we chose the best personal loans

Our team of consumer lending experts follows an objective and robust methodology to rate lenders and pick the best.

35+

Lenders reviewed

We review over 35 lenders, including major banks, top credit unions, leading digital platforms, and high interest installment lenders operating across multiple states.

25+

Categories assessed

Each lender is evaluated across five weighted categories and 27 subcategories, covering affordability, eligibility, consumer experience, flexibility, and application process.

70+

Data points analyzed

Our team tracks and reassesses hundreds of data points annually, including APR ranges, fees, credit requirements, and borrower tools, ensuring up to date, accurate comparisons.

Star rating categories

We evaluate more categories than competitors and carefully weigh how each factor impacts your experience.
Affordability

25%

We review lenders’ annual percentage rate offerings at least twice per year and the competitiveness of each lenders’ APR range. We also assess whether a lender charges an origination fee and any opportunity for borrowers to receive a rate discount.
Customer experience

20%

We consider the experience of the consumer trying to manage a personal loan, which means accessibility of customer service representatives, whether borrowers can choose and change their payment due date, and the ability to track their loan on a mobile app.
Underwriting and eligibility

20%

We consider the rigorousness of each lender’s underwriting practices and how widely available their loans are. This category includes whether a lender does a hard credit check before providing a loan, the range of credit profiles they accept and how many states their loans are offered in.
Loan flexibility

20%

We assess how flexible lenders can be with borrowers, including whether they offer multiple loan types, personal loan amounts and repayment term options and whether they offer direct payment to creditors on debt consolidation loans.
Application process

15%

We consider the lender’s full application process, including a borrower’s ability to preview their loan offer via pre-qualification, whether basic loan information such as APR range and repayment terms are available and easy to find online and how quickly a loan can be funded after approval.

5.0

Overall score

NerdWallet’s review process evaluates and rates personal loan products from more than 35 financial technology companies and financial institutions. We collect over 70 data points and cross-check company websites, earnings reports and other public documents to confirm product details. We may also go through a lender’s pre-qualification flow and follow up with company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
Our star ratings award points to lenders that offer consumer-friendly features, including: soft credit checks to pre-qualify, competitive interest rates and no fees, transparency of rates and terms, flexible payment options, fast funding times, accessible customer service, reporting of payments to credit bureaus and financial education. Our ratings award fewer points to lenders with practices that may make a loan difficult to repay on time, such as charging high annual percentage rates (above 36%), underwriting that does not adequately assess consumers’ ability to repay and lack of credit-building help. We also consider regulatory actions filed by agencies like the Consumer Financial Protection Bureau. We weigh these factors based on our assessment of which are the most important to consumers and how meaningfully they impact consumers’ experiences.
NerdWallet does not receive compensation for our star ratings. Read more about our ratings methodologies for personal loans and our editorial guidelines.
To recap our selections...

NerdWallet's Personal Business Loans: Compare Financing Options

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