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Should I Take Out a Personal Loan to Start a Business?

Personal loans can be used for almost any personal expense — including covering business costs.

Emily Guy Birken Emily Guy Birken Edited by Maddie Lloyd Updated January 6, 2023

Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as "Credible."

While the U.S. Small Business Administration (SBA) offers SBA loans to new and established small business owners, these loans require the borrower to submit a business plan and often take some time to process — which can mean they’re out of reach for entrepreneurs who need quick access to cash for their ventures.

But you might be able to get the startup funding you need through a personal loan. Although some lenders prohibit their loans from being used for business expenses, other lenders will let you use the funds to buy inventory, pay for marketing, or cover other business-related costs.

Here’s everything you need to know about getting a personal loan to start a business:

  • 14 personal loans to start a business
  • What’s the difference between an SBA loan and a personal loan?
  • Pros of using a personal loan to start a business
  • Cons of using a personal loan to start a business
  • Applying for a personal loan for a business
  • Choosing the right lender
  • Business loan alternatives

14 personal loans to start a business

If you decide to take out a personal loan for your business, it’s important to consider as many lenders as possible. Comparing multiple lenders ensures that you find the right loan for your specific needs.

This is easy with Credible. You can compare your prequalified rates from our partner lenders that offer personal loans for business expenses below in just two minutes.

LenderFixed ratesLoan amountsLoan terms (years)


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
7.99% - 29.99% APR $10,000 to $50,0002, 3, 4, 5
  • Fixed APR: 7.99% - 29.99% APR
  • Min. credit score: Does not disclose
  • Loan amount: $10,000 to $50,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: If approved, funds sent within 24-72 hours†
  • Fees: Origination fee
  • Discounts: No
  • Eligibility: Available in all states except CO, CT, HI, KS, NH, NY, ND, OR, VT, WV, WI, and WY
  • Customer service: Phone
  • Soft credit check: Yes
  • Min. Income: None
  • Loan Uses: Debt consolidation, home improvement, wedding, travel, medical expenses, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
9.95% - 35.99% APR $2,000 to $35,000**2, 3, 4, 5*
  • Fixed APR: 9.95% - 35.99% APR
  • Variable APR: N/A
  • Min. credit score: 550
  • Loan amount: $2,000 to $35,000**
  • Loan terms (years): 2, 3, 4, 5*
  • Time to fund: As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: Available in all states except CO, IA, HI, VT, NV NY, WV
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Loan servicer: Avant
  • Loan Uses: Debt consolidation, emergency expense, life event, home improvement, and other purposes
  • Min. Income: $1,200 monthly


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
7.99% - 15.19% APR $10,000 to $50,0003, 4, 5, 6
  • Fixed APR: 7.99% - 15.19% APR
  • Variable APR: N/A
  • Min. credit score: 700
  • Loan amount: $10,000 to $50,000
  • Loan terms (years): 3 to 6
  • Time to fund: Next business day
  • Fees: No prepayment penalty
  • Discounts: None
  • Eligibility: Available in all 50 states
  • Customer service: Phone
  • Soft credit check: Yes
  • Min. Income: Does not disclose
  • Loan Uses: Debt consolidation, home improvement, self-employment, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
8.99% - 35.99% APR $5,000 to $35,0002, 3, 4, 5
  • Fixed APR: 8.99% - 35.99% APR
  • Variable APR: N/A
  • Min. credit score: 600
  • Loan amount: $2,000 to $50,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: As soon as 1 to 3 business days after successful verification
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all states except DC, IA, VT, and WV
  • Customer service: Phone
  • Soft credit check: Yes
  • Loan servicer: Best Egg and Blue Ridge Bank
  • Min. Income: None
  • Loan Uses: Credit card refinancing, debt consolidation, home improvement, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
6.99% - 24.99% APR $2,500 to $35,0003, 4, 5, 6, 7
  • Fixed APR: 6.99% - 24.99% APR
  • Min. credit score: 660
  • Loan amount: $2,500 to $35,000
  • Loan terms (years): 3, 4, 5, 6, 7
  • Time to fund: As soon as the next business day after acceptance
  • Fees: Late fee
  • Discounts: None
  • Eligibility:  Available in all 50 states
  • Customer service: Phone
  • Soft credit check: Yes
  • Loan Uses: Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
8.3% - 35.89% APR $1,000 to $40,0003, 5
  • Fixed APR: 8.3% - 35.89% APR
  • Min. credit score: 600
  • Loan amount: $1,000 to $40,000
  • Loan terms (years): 3, 5
  • Time to fund: Usually takes about 2 days†
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all 50 states
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Loan servicer: LendingClub Bank
  • Min. Income: None
  • Loan Uses: Debt consolidation, paying off credit cards, home improvement, pool loans, vacations, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
7.99% - 35.99% APR $2,000 to $36,5002, 3, 4, 5, 6
  • Fixed APR: 7.99% - 35.99% APR
  • Min. credit score: 580
  • Loan amount: $2,000 to $36,500
  • Loan terms (years): 2, 3, 4, 5, 6
  • Time to fund: As soon as the next business day
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: Available in all states except NV and WV
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: $20,000
  • Loan Uses: Home improvement, consolidate debt, credit card refinancing, relocate, make a large purchase, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
5.99% - 23.99% APR $5,000 to $100,0002, 3, 4, 5, 6, 7
(up to 12 years for home improvement loans)
  • Fixed APR: 5.99% - 23.99% APR
  • Min. credit score: 660
  • Loan amount: $5,000 to $100,000
  • Loan terms (years): 2, 3, 4, 5, 6, 7*
  • Time to fund: As soon as the same business day
  • Fees: None
  • Discounts: Autopay
  • Eligibility: Available in all states except RI and VT
  • Customer service: Phone, email
  • Soft credit check: No
  • Loan servicer: LightStream
  • Min. Income: Does not disclose
  • Loan Uses: Credit card refinancing, debt consolidation, home improvement, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
18.0% - 35.99% APR $1,500 to $20,0002, 3, 4, 5
  • Fixed APR: 18.0% - 35.99% APR
  • Min. credit score: None
  • Loan amount: $1,500 to $20,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: As soon as 1 to 2 business days after approval
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Must have photo I.D. issued by U.S. federal, state or local government
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: Does not disclose


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
7.74% - 17.99% APR $600 to $50,000
(depending on loan term)
1, 2, 3, 4, 5
  • Fixed APR: 7.74% - 17.99% APR
  • Min. credit score: 660
  • Loan amount: $600 to $50,000*
  • Loan terms (years): 1, 2, 3, 4, 5
  • Time to fund: 2 to 4 business days after verification
  • Fees: None
  • Discounts: None
  • Eligibility: Does not disclose
  • Customer service: Phone, email
  • Soft credit check: No
  • Min. Income: Does not disclose
  • Loan Uses: Debt consolidation, home improvement, transportation, medical, dental, life events


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
6.99% - 35.99% APR $2,000 to $50,0002, 3, 4, 5
  • Fixed APR: 6.99% - 35.99% APR
  • Min. credit score: 640
  • Loan amount: $2,000 to $50,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: As soon as one business day
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all states except IA, ND, WV
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: None
  • Loan Uses: Debt consolidation, home improvement, vehicles, small business, new baby expenses, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
11.69% - 35.93% APR7 $1,000 to $50,0003 to 5 years 8
  • Fixed APR: 11.69% - 35.93% APR7
  • Min. credit score: 560
  • Loan amount: $1,000 to $50,000
  • Loan terms: 3 to 5 years 8
  • Time to fund: Within one day, once approved9
  • Loan types: Debt consolidation, pay off credit cards, home improvements, unexpected expenses, home and auto repairs, weddings, and other major purchases
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: A U.S. citizen or permanent resident; not available in DC, SC, WV
  • Customer service: Phone, email
  • Soft credit check: Yes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
8.49% - 35.97% APR $1,000 to $50,0002, 3, 5, 6
  • Fixed APR: 8.49% - 35.97% APR
  • Min. credit score: 560
  • Loan amount: $1,000 to $50,000*
  • Loan terms (years): 2 to 7
  • Time to fund: Within a day of clearing necessary verifications
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: Available in all states except West Virginia
  • Customer service: Email
  • Soft credit check: Yes
  • Min. Income: Does not disclose
  • Loan Uses: Debt consolidation, credit card refinancing, home improvement, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
5.4% - 35.99% APR4 $1,000 to $50,00053 to 5 years4
  • Fixed APR: 5.4% - 35.99% APR4
  • Min. credit score: 580
  • Loan amount: $1,000 to $50,0005
  • Loan terms (years): 3 to 5 years4
  • Time to fund: As fast as 1 business day6
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all 50 states
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: $12,000
  • Loan Uses: Payoff credit cards, consolidate debt, take a course or bootcamp, relocate, make a large purchase, and other purposes
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All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | 10SoFi Disclosures | Read more about Rates and Terms

Because unsecured business loans don’t require collateral, they can be a good option for small startups who might not have enough valuable collateral to back a secured loan. Although interest rates tend to be higher for unsecured loans, you can often receive your funds faster than with a secured business loan.

It can take anywhere from 30 to 90 days for the SBA to approve and process your loan, while an online personal loan lender may be able to release your funds within five business days of approval.

What’s the difference between an SBA loan and a personal loan?

Personal loans are offered by private lenders — including online lenders, traditional banks and credit unions — and can be used for almost any personal expense, such as covering business costs. With a personal loan, you can typically borrow anywhere from $600 up to $100,000 or more with repayment terms from one to seven years, depending on the lender.

SBA loans, on the other hand, are partially guaranteed by the Small Business Administration. With these types of loans, the SBA guarantees lenders that it will pay up to 85% of the loan if the borrower defaults. These loans range up to $5 million with repayment terms from 10 to 25 years (depending on how you use the loan).

If you’re considering an SBA loan vs. a personal loan, here are some important points to keep in mind:

SBA loanPersonal loan
Fixed rates5% to 8% + prime
(depending on loan amount)
5.4%+
(with Credible partner lenders)
Variable rates2.25% to 4.75% + base rate
(depending on loan amount and term)
N/A
Loan amountUp to $5 million$600 to $100,000
(depending on the lender)
Repayment terms10 to 25 years
(depending on loan use)
Typically 1 to 7 years
(depending on the lender)
RequirementsYour business must:
  • Operate for profit
  • Be engaged in or propose to do business in the U.S. or its territories
  • Have reasonable amount of owner equity to invest
    (usually $1 for every $3 borrowed)
  • Use alternative funding sources (including personal assets) first
Can vary by lender but typically must have:
  • Good credit
  • Verifiable income
  • Low debt-to-income ratio
Credit eligibilityPersonal and company credit must show positive payment historiesGenerally have good to excellent credit
Time to fund
  • 5 to 10 business days for standard loans
  • 36 hours for express loans
Usually within a week
(depending on the lender)

SBA loan requirements

SBA loans also have additional requirements compared to personal loans. To be eligible, your business must:

  • Operate for profit
  • Be engaged in or propose to do business in the U.S. or its territories
  • Have a reasonable amount of owner equity to invest (generally, $1 of your own money to invest for each $3 borrowed)
  • Use alternative financial resources (including personal assets) before seeking financial assistance

These requirements can make it harder to qualify for an SBA loan as a new business owner compared to getting a personal loan — especially since you’ll also need to provide a full business plan to the lender.

Keep in mind: Both your personal and business credit history will be considered for an SBA loan. But you’ll have the opportunity to explain any extenuating circumstances that might have affected your credit history to the lender.

Can I get an SBA loan with bad credit?

Possibly. The Small Business Administration doesn’t have a minimum required credit score for its loans. Instead, it’s up to the lenders that offer these loans to determine who to approve. In general, the credit reports for both you and your company should illustrate positive payment histories and demonstrate your ability to manage your obligations.

But you might still be able to get an SBA loan with bad credit — for example, if you’ve been in business for several years or if there are extenuating circumstances that led to your poor credit score. In these cases, it could still be worth it to apply for an SBA loan even if your credit is less than ideal.

Learn More: How to Get a Personal Loan

Can I get a personal loan with bad credit?

You’ll typically need good to excellent credit to qualify for a personal loan — a good credit score is usually considered to be 700 or higher. Several lenders offer personal loans for bad credit, but these loans tend to come with higher interest rates compared to good credit loans.

If you have bad credit and are struggling to get approved for a personal loan, here are a few options to consider:

  • Apply with a cosigner: Having a cosigner with good credit can increase your approval chances and might also get you a better interest rate than you’d get on your own. Just remember that because your cosigner shares responsibility for the loan, they’ll be on the hook if you don’t make your payments.
  • Take out a secured loan: While most personal loans are unsecured, some lenders offer secured personal loans that require collateral. Because these loans are less risky for the lender, it could be easier to qualify for one even if you have poor credit. But keep in mind that if you can’t make your payments, you risk losing your collateral.
  • Improve your credit: If you can wait to take out a loan, it could be worth taking the time to build your credit so it’ll be easier to qualify in the future. You can improve your credit by making on-time payments on all of your bills or paying down credit card balances.

Check Out: Personal Loans to Consider When You’re Self-Employed

Pros of using a personal loan to start a business

Taking out a personal loan to start a business can be a good choice in some cases, but it isn’t right for everyone. If you’re considering a personal loan, here are a few potential benefits to keep in mind:

  • Lower rates: Personal loan interest rates tend to be lower than rates on credit cards.
  • Might be easier to qualify for: Unlike with SBA loans, you don’t have to worry about providing a full business plan or having owner equity to be eligible for a personal loan.
  • Fast funding: You can usually expect to get your funds within one week — though some lenders will fund loans as soon as the same or next business day after approval.
  • Flexible loan use: One of the main benefits of a personal loan is that they’re incredibly flexible and for the most part, you can use them for whatever expense you wish. For example, you could use a personal loan to buy business equipment, consolidate debt, pay off a bill, or finance an office renovation.

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Cons of using a personal loan to start a business

  • Fewer options for bad credit: You’ll generally need good to excellent credit to qualify for a personal loan, which means you could have a hard time getting approved if you have poor or fair credit.
  • Smaller loan amounts: Personal loans typically range from $600 to $100,000, compared to the $25,000 to $5 million you could get with an SBA loan.
  • Shorter repayment terms: You’ll generally have one to seven years to repay a personal loan, depending on the lender. SBA loans, on the other hand, provide terms from 10 to 25 years, depending on how you use the loan.
Personal loan prosPersonal loan cons
  • Lower rates than credit cards
  • Could be easier to qualify for than an SBA loan
  • Fast funding
  • Fewer options for bad credit
  • Smaller loan amounts
  • Shorter repayment terms

If you decide to take out a personal loan for your business, be sure to consider your overall loan cost. This way, you can be prepared for any added expenses.

You can estimate how much you’ll pay for a loan using our personal loan calculator below.

Enter your loan information to calculate how much you could pay

? Enter the total amount borrowed $
? Enter your annual interest rate %
or
? Enter the amount of time you have to repay your loan years
Total Payment $
Total Interest $
Monthly Payment $

With a $ loan, you will pay $ monthly and a total of $ in interest over the life of your loan. You will pay a total of $ over the life of the loan.


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Applying for a personal loan for a business

If you’re ready to apply for a personal loan for your business funding needs, follow these four steps:

  1. Compare lenders. Be sure to shop around and compare as many personal loan lenders as possible to find the right loan for your unique situation. First, you’ll want to confirm that the lender allows its loans to be used for business purposes. Then look at interest rates, repayment terms, and any fees the lender charges.
  2. Pick a loan option. After comparing lenders, choose the loan option that best suits your needs.
  3. Complete the application. Once you’ve picked a loan option, you’ll need to complete an application and submit any required documentation, such as pay stubs or tax returns.
  4. Get your funds. If you’re approved, the lender will have you sign a loan agreement so you can receive your money. The time to fund for a personal loan is usually about one week, but some lenders may be able to release your funds as soon as the same or next business day after approval.

Learn More: Where to Get a Personal Loan

Choosing the right lender

As you weigh your options, it’s critical to take the time to compare as many lenders as possible so you can find the best loan for your business needs. Here are several important points to consider as you do your research:

  • Loan uses: While the majority of lenders allow personal loans to be used for almost any personal expense, some limit the uses of their loans, while others specifically prohibit using their loans for business purposes.
  • Interest rates: Your interest rate is one of the biggest factors that will determine how much you end up paying for your loan over time. Your credit score and the repayment term you choose will also impact the rates you qualify for.
  • Repayment terms: You’ll generally have one to seven years to repay a personal loan, depending on the lender. While picking a longer term could reduce your monthly payments, it’s usually best to choose the shortest term you can afford to keep your interest costs low. Many lenders also provide lower rates to borrowers who opt for shorter terms.
  • Loan amounts: Personal loans typically range from $600 to $100,000 or more, depending on the lender. You’ll need to think about exactly how much you’ll need for your business and which lenders provide large enough loans.
  • Credit requirements: Most lenders require borrowers to have good to excellent credit to qualify for a personal loan. While some lenders provide bad credit loans, these loans usually have higher interest rates compared to those for borrowers with good credit. If your credit is less than stellar, you might want to consider applying with a cosigner — not all lenders allow cosigners on personal loans, but some do.

Business loan alternatives

If you decide a small business loan isn’t the right fit for your needs, consider these alternative options:

  • Small business line of credit: If you’re unsure of how much money you’ll need to borrow, you can open a line of credit to borrow from as needed, up to your credit limit. A small business line of credit can be a great option for covering unexpected or emergency expenses.
  • Business credit cards: A business credit card can also come in handy when sudden expenses arise. If you do have a major expense planned, you may be able to open a new business credit card with a 0% APR introductory offer. Be sure to pay off your debt before the introductory period ends, or you’ll face interest charges on any unpaid balances.
  • Invoice financing: With invoice financing, you’ll sell your outstanding invoices to a financing company at around 80% to 95% of their value. Once the invoice is paid, you can collect the rest of the invoice’s value and only have to pay the financing fee.
  • Secured small business loan: Secured business loans can be a good option if you have poor credit or want a longer repayment period for expensive purchases. Repayment terms for secured loans can range from 10 to 30 years and offer interest rates as low as 5.5% for business loans. Just keep in mind that because these loans are backed by collateral, you risk losing your asset if you can’t make payments.

If you’re ready to compare your loan options, Credible’s partner lenders offer highly flexible loans for a variety of purposes. You can see your prequalified rates from multiple lenders in two minutes — without affecting your credit.

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Jacqueline DeMarco contributed to the reporting for this article.

About the author
Emily Guy Birken
Emily Guy Birken

Emily Guy Birken is a Credible authority on student loans and personal finance. Her work has been featured by Forbes, Kiplinger’s, Huffington Post, MSN Money, and The Washington Post online.

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