Best Personal Business Loans of November 2024

Small business loan approval rates were as low as 13% at big banks in November 2023, according to Biz2Credit’s Small Business Lending Report. If you can’t get a traditional business loan, you may need to consider alternative options, like using a personal loan for business expenses instead.

You can usually qualify for a personal loan if you have a good credit score and enough income to make payments — but you’ll also need to find a lender willing to let you use a personal loan for business purposes. We evaluated lenders that allow personal loans for business to help you narrow your options.

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Best personal business loans

The best personal loans for businesses come with high borrowing limits, flexible terms, low rates and fees, and no restrictions on business use of the funds. We evaluated these loan features, along with factors like lender reputation and customer experience, to choose the best personal loan lenders for business owners.

Methodology

We evaluated the best personal loans for business based on factors such as customer experience, minimum fixed rate, maximum loan amount, funding time, loan terms, fees, discounts, and whether cosigners are accepted. Our team of experts gathered information from each lender’s website, customer service department, directly from our partners, and via email support. Each data point was verified by a third party to make sure it was accurate and up to date. Please review our complete personal loan methodology.

Can you get a personal business loan?

A personal loan is similar to a business loan, except there are no business requirements to qualify. Instead, approval for these unsecured loans is based on your personal credit score, income, and debt. You receive the money from a personal loan up front as a lump sum and repay it in fixed monthly installments over several months or years.

However, each lender has its own rules about restricted loan uses, and some lenders prohibit borrowers from using the funds for business expenses. Be honest about your intended loan purpose and check for any restrictions in the loan agreement before accepting a loan offer. If you violate the terms of your contract, the lender could force you to immediately repay the loan in full.

When you formally apply for a loan, the lender will conduct a hard credit check, which could ding your score by a few points.

Should you use personal loans for business purposes

If you can qualify for a business loan or Small Business Administration (SBA) loan, you’ll likely get a lower interest rate than you would with a personal loan, especially if you don’t have good credit.

SBA loan interest rates top out at 6.50% plus the prime rate for loans under $50,000 — the more you borrow, the lower the maximum rate. The prime rate as of April 2024 is 8.50%, which puts the maximum SBA loan rate at 15%. Personal loans, on the other hand, have interest rates that top out around 36.00% APR (the lower your credit score, the higher your rate).

You may also get a longer repayment term with a small business loan than you would with a personal loan. Personal loan repayment terms often extend to seven years, while SBA loan repayment terms can extend to 25 years.

However, you generally need to provide collateral for a small business loan (unless the loan is for less than $50,000), and qualification can be tough. You’ll also need to wait longer to receive loan funds — business loans can take weeks to fund, while personal loans can be available within days.

How to get a personal loan for business use

1. Review your personal finances: Get a free copy of your credit report from AnnualCreditReport.com to see if you can qualify for a personal loan, then review your budget to make sure you can afford repayment. You shouldn’t rely on business income to repay a personal loan, since default can negatively impact your credit and result in collection attempts. Bear in mind that 18% of small businesses fail within the first year, according to the Bureau of Labor Statistics.
2. Consider a few lenders: Research lenders based on eligibility, customer reviews, advertised rates and fees, and any features that are important to you, making sure to exclude lenders that prohibit using the loan funds for business expenses. The list on this page is a great place to start.
3. Prequalify: Most lenders allow you to check your rate with only a soft credit pull, which won’t impact your credit. You should go through this process with a few lenders. Keep in mind that your final rate could differ from the estimate.
4. Compare loan offers: Choose the lender that offers the lowest annual percentage rate (APR) while also providing the loan amount and repayment term you need. The APR shows your annual borrowing cost expressed as a percentage, including both interest and fees.
5. Formally apply: Once you’ve selected a loan offer, fill out the formal application and upload the required documents, which may include personal identification, tax returns, and utility bills. You’ll also need to authorize a hard credit check when submitting your application, which could cause your credit score to temporarily decrease by a few points.
6. Sign and accept: Check your final rate and read the fine print, making sure you understand the rules and repayment terms. If everything looks good, sign the documents to initiate the transfer of the funds.

Pros of using a personal loan for business

• Fewer requirements: When applying for a business loan, you’ll find that most lenders have business history and annual revenue requirements in addition to a minimum credit score. For example, you may need 1 or 2 years in business and $100,000 in annual revenue to qualify. To get a personal loan, on the other hand, you typically need at least a fair credit score (a FICO score at or above 580) and a source of personal income — requirements vary by lender, but the best rates are reserved for borrowers with excellent credit.
• Flexible use of funds: Personal loans can be used for a variety of purposes, so you may be able to put some of the funds into your business and use the rest to consolidate debt or make a necessary purchase for your home. Just make sure to follow IRS rules and only deduct interest for the portion of the loan used for business expenses on your tax return.
• Lower rates than credit cards: Think twice before using your credit card for business expenses, unless you’ll be able to pay off the balance during the grace period. Credit card plans have an average interest rate of 22.63%, according to the Federal Reserve, while 24-month personal loans have an average rate of just 12.49%. That said, you may get an even lower rate if you can qualify for a business loan from the SBA.

Cons of using a personal loan for business

• Lower borrowing limits: BHG offers personal loans up to $200,000, but most other lenders cap personal loans at $50,000 or $100,000. Business loans offer higher borrowing amounts. For example, 7(a) loans backed by the Small Business Administration (SBA) are available in amounts up to $5.5 million.
• No opportunity to build business credit: If you take out a personal loan, you’ll be personally liable for repayment. Making on-time payments may improve your personal credit score but will have no impact on your business credit score. While most business loans require a personal guarantee, which also leaves you personally liable for repayment, some also allow you to build business credit with on-time payment. Once your business is established and has credit history, you may be able to access credit without a personal guarantee.
• Higher rates than business loans: You may pay a higher interest rate with a personal loan than a business loan, especially if you have less-than-perfect credit. For example, SBA 7(a) loans are capped at 6.50% above the prime rate, with lower maximums for larger loans. Some secured business loans come with even lower rates, and some lenders allow businesses to repay their funding as a percentage of sales.

Alternatives

• SBA loans: SBA loans are backed by the government agency and issued by private lenders. The reduced risk to the lender makes these loans easier to access, and they come with competitive rates and fees. Some loans are unsecured and also include business education and support. They come in amounts from $500 to $5.5 million, and can be used for a variety of business purposes.
• Business lines of credit: A business line of credit is a revolving credit line that works like a credit card — you can borrow up to your approved limit as needed, and as you repay what you use with interest, your credit line replenishes. This gives you ongoing access to funds without needing to reapply. Requirements are similar to business term loans and other types of business financing.
• Business credit cards: A business credit card can be a good way to pay for smaller ongoing expenses and keep them separate from your personal expenses for tax purposes. You can often qualify without meeting time in business or revenue requirements. Some cards come with 0% introductory APRs, so you can avoid paying interest until your business is up and running, or up to 18 months.
• Venture capital: An angel investor or venture capital firm may be willing to invest in your business in exchange for equity. This isn’t a loan that requires repayment, but you’ll give up some control and a share of ownership to receive the funding. You’ll need a strong business plan to get funding, but startups are eligible.
• Crowdfunding: Crowdfunding involves collecting small investments from a group of individuals via an online platform. It doesn’t require you to take on debt. It works best for businesses that can offer a product or service to investors in exchange for their contribution, but some businesses use equity-based crowdfunding instead, and it’s also possible to run a successful campaign with only donations.
• Peer-to-peer (P2P) lending: Getting a business loan from a group of individuals comes with far fewer requirements — there are typically lower or no minimum credit or revenue requirements, and P2P loans may be available for new businesses. P2P loans may come with better rates, as well. For example, the nonprofit lending platform Kiva offers business loans up to $15,000 at 0% interest.

FAQ

Can you use a personal loan for business use?

Unless the lender prohibits borrowers from using personal loan funds for business expenses, you can use the money from a personal loan for a variety of business purposes.

Can you get a personal business loan with bad credit?

While most lenders require at least fair credit, some online lenders use alternative lending criteria to expand access to borrowers with low credit scores. For example, Upstart requires only a minimum credit score of 300, and also offers loans to students with no credit history. Bear in mind that bad-credit personal loans come with higher interest rates and fees.