How To Get A Personal Loan To Start A Business

Can you use a personal loan to start or fund a business? Personal loans for business use are surprisingly easy to get, if you know where to look.

WRITTEN & RESEARCHED BY
Erica Seppala
Editor & Senior Staff Writer

Dec 16, 2025

UPDATED

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Key Takeaways

Personal loans can help fund a startup when limited business history makes traditional business loans difficult to obtain.
Approval is based on personal credit and income, making personal loans accessible to early-stage entrepreneurs.
Personal loans aren’t ideal for large funding needs or when upcoming personal financing could be affected by higher debt.

Using a personal loan to start a business can be a practical way to access funding without an established business history.

Because many business loans require time in business or business credit, startups often face limited options. A personal loan bases approval on your personal credit and income instead, allowing you to bypass those requirements and secure financing sooner.

Table of Contents

Why Use A Personal Loan To Start A Business?
Personal Loans For Business VS Business Loans
How To Get A Personal Loan To Start A Business
How To Use A Personal Loan For Business
When To Use A Personal Loan For Your Business & When To Avoid It
Next Steps: Where To Find Personal Loans For Your Business

Why Use A Personal Loan To Start A Business?

Personal loans can often be used for business expenses and don’t require an established business history. While many business loans require six months to two years in operation, personal loans have no time-in-business requirement.

Instead, approval is based primarily on your personal credit and income, making personal loans a practical option for startups and new business owners.

Personal Loans For Business VS Business Loans

	Personal loans	Business loans
Borrowing amounts	Generally low	Can be low or high
Credit check	Yes	Usually (credit score requirements may be low)
Minimum time in business	N/A	At least 6 months
Can be used for business expenses	Yes (check with lender)	Yes (some may have restrictions)
Liability	Personal assets	Business assets

Both personal and business loans are usually installment loans, meaning you receive a lump sum and repay it in fixed payments over time. The key differences come down to eligibility, loan size, and risk.

Borrowing limits: Personal loans typically cap out around $40,000 to $50,000, while business loans can offer much higher amounts for qualified borrowers.
Credit requirements: Personal loans rely heavily on your personal credit and income. Business loans may also consider cash flow, sales volume, or invoices.
Time in business: Personal loans have no business history requirement. Business loans almost always do.
Use of funds: Personal loans can often be used for business expenses, but lender rules vary. Business loans may restrict use depending on loan type.
Collateral & liability: Personal loans are usually unsecured and tied to your personal assets. Business loans may require collateral or a personal guarantee.

How To Get A Personal Loan To Start A Business

To qualify for a personal loan, lenders focus on your personal credit and ability to repay. Borrowers with a credit score above 600 and a debt-to-income (DTI) ratio under 46% generally have the best approval odds.

Before applying, check your credit score and review your DTI. If you fall short, improving credit or lowering existing debt can expand your options and reduce costs.

What Documents Do You Need To Get A Personal Loan For Business

Personal loan applications are straightforward. Most lenders require:

Personal identification and contact information
Proof of income (such as tax returns or pay stubs)
Bank statements
A personal credit report

Because approval isn’t tied to business performance, no business financials are typically required.

How To Use A Personal Loan For Business

If your lender allows business use, a personal loan can cover most common business expenses. This flexibility makes personal loans especially useful for startups and newer businesses that don’t yet qualify for traditional business financing.

Startup Costs

Personal loans can cover core startup expenses such as inventory, supplies, equipment, permits, insurance, leases, and initial hiring or training costs.

Marketing & Advertising

Funds can be used to launch or scale marketing efforts, including digital ads, social media campaigns, branding, or hiring a marketing agency.

Equipment Purchases

Personal loan proceeds can be used to buy equipment outright, from POS systems and office furniture to production machinery or vehicles — without the restrictions of equipment financing.

Business Expansion

A personal loan may help fund early expansion, such as facility upgrades, additional locations, or acquiring another business, when traditional loans aren’t yet available.

Working Capital

Personal loans can provide short-term working capital to cover operating expenses, seasonal slowdowns, or temporary cash flow gaps.

Emergency Expenses

Unexpected expenses can be spread out over time with a personal loan instead of draining business or personal savings.

Inventory & Supplies

Loans can be used to purchase inventory or supplies during seasonal demand spikes or when cash flow is temporarily tight.

When To Use A Personal Loan For Your Business & When To Avoid It

A personal loan can be a useful funding tool, but it isn’t right for every situation. The key is knowing when it fits — and when it doesn’t.

Use A Personal Loan For Business If…

You’re just getting started: If your business hasn’t launched or isn’t generating revenue yet, personal loans can help cover startup costs when business loans aren’t an option.
You don’t qualify for business financing: New or low-revenue businesses may use personal loans to bridge early-stage gaps.
Your industry is considered high-risk: Lenders may be more willing to lend based on your personal credit than your business profile.
Your personal credit is stronger than your business profile: Strong credit and low DTI may qualify you for better rates than a business loan.

Avoid Using Personal Loans For Business If…

You need a large amount of capital: Personal loans typically cap well below what SBA or traditional business loans can offer.
You plan to apply for major personal financing soon: A personal loan increases your DTI and can make it harder to qualify for mortgages, auto loans, or other personal credit. Late or missed payments will also affect your personal credit.

Next Steps: Where To Find Personal Loans For Your Business

Once you’re ready to apply for a personal loan for business, it’s time to find the most affordable personal loan with terms that work best for your financial situation. You can get started with our picks for best personal loans for small business.

Looking for alternatives to personal loans for business? Check out our picks for best small business grants.

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Erica Seppala

Editor & Senior Staff Writer at Merchant Maverick

Erica has been writing about small business finance and technology since 2008. She joined Merchant Maverick in 2018 and specializes in researching and reviewing business software, financial products, and other topics to help small businesses manage and grow their operations. Her expertise has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll, a graduate of Limestone University, and currently resides in Greenville, South Carolina.

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