Business loans vs. personal loans | Which is a better value?

Compare business loans vs. personal loans

There’s a range of financing options available for small businesses. Find out if yours is more suited for a business loan or personal loan.

You may be looking for a loan for your business for many reasons. A sudden spike in sales might have created a need for some additional cash flow, or maybe that influx has created the need to expand. While a tailored business loan would seem to be the obvious choice, many smaller businesses still choose personal loans, favoring its simplicity and ease of applying. Here we consider the pros and cons of both.

Jump to a quick side-by-side comparison of business loans vs. personal loans >>>

Jump to compare top online lenders for business and personal loans >>>

OnDeck Small Business Loans

OnDeck Small Business Loans

Among the largest online business lenders offering term loans and lines of credit at competitive fixed rates.

  • Minimum Amount: $5,000
  • Maximum Amount: $500,000
  • Loan Term: 3 to 36 months
  • Simple online application process with fast decisions
  • Dedicated loan specialists and loyalty benefits
  • Must have been in business for at least one year with annual revenue of $100,000+
  • Must have a personal credit score of 500+

    Main differences between business loans and personal loans

    Business loansPersonal loans
    APRHow business lenders charge for their loans can vary widely. Some offer interest rates as low as 5.5%. Keep in mind that some lenders charge monthly fees rather than traditional loan interest rates.Both fixed and variable interest rates can be offered. Some lenders offer starting APR’s as low as 3.99%, or even lower for secured loans.
    TermsBoth short term and long term financing options are available. You could get financing for as short as a month with invoice financing or get funds to be paid back within 25 years with SBA loans.Repayment periods are usually between 1 and 7 years.
    Loan AmountMaximums can be as high as $5 million.Maximums can be as high as $100,000.
    EligibilityYour business finances are usually weighed more heavily than your personal finances. Typically requires you to have been in business for at least one year and have monthly revenue of at least $10,000.Typically requires good to excellent credit. Lenders may also evaluate other financial factors such as your income and debt-to-income ratio.
    Ease of applicationYou’ll likely have to submit a business plan and your accounting numbers with your application. Some lenders, mostly traditional banks, may require you to apply for a business loan in person.Applications can usually be completed online in just a few minutes, with some lenders offering pre-approval.
    Restrictions on useCan be used for a wide variety of business purposes including financing equipment purchases, payroll, buying a vehicle and much more.There are many general purpose personal loans that can be used for just about any legitimate reason. You can also apply for specifically purposed loans for things like purchasing a car or refinancing student loans.

    Which is easier to apply for, a business loan or a personal loan?

    • Business loan. Most banks want to see detailed projections, business plans and assurances that your company will be in a position to make repayments for the whole loan period. However, many online business lenders require fewer details to approve a business loan. You’ll find these lenders may approve you after simply seeing your business’s accounting information or financials as well as your own personal information.
    • Personal loan. You can apply for a personal loan in just a few minutes. The fate of your application for a personal loan will be predominantly decided by your credit and your own personal financial situation. You’ll also need proof of income, and if you are self-employed you will likely need the last two years of tax returns.

    Which offers better value for my business?

    • Business loan. For business taxes, there are significant benefits to keeping your personal and business affairs separate including easier filing come tax season and interest deductions. You could borrow well over $1 million with a business loan.
    • Personal loan. Personal loans can come with a range of money-saving perks, including no prepayment penalties and autopay discounts. The most you can borrow with a personal loan is up to $100,000, with most lenders offering lower maximum amounts. If your businesses requires more financing, it could be cumbersome to take out multiple personal loans from different lenders.

    What if I have business partners?

    If you opt for a business loan, the loan will be held in a joint account with easy access for all partners. With the loan guaranteed by each partner, the risk placed on each individual is greatly reduced. If you decide to apply for a personal loan, lack of joint access to your company’s loan may affect the efficiency of your company, or create issues of responsibility if the business is unable to meet repayments. However, there is the option of taking out a joint application personal loan. These loans usually have a maximum of two applicants, although some may allow more.

    Compare your options for business loans and personal loans

    Rates last updated February 21st, 2018
    Name Product Product Description Min Loan Amount Maximum Loan Amount Requirements
    LendingTree Business Loans
    Compare multiple business financing options in one place including: small business loans, lines of credit, SBA loans, equipment financing and more.
    Varies by lender and type of financing
    Varies by lender and type of financing
    Varies by lender, but you many require good personal credit, a minimum business age and minimum annual revenue.
    OnDeck Small Business Loans
    A leading online business lender offering flexible financing at competitive fixed rates.
    $5,000
    $500,000
    Must have been in business for at least one year with annual revenue of $100K+. Must have a personal credit score of 500+.
    LendingClub Business Loans
    With loan terms that vary from 1 to 5 years, enjoy fixed monthly payments and no prepayment penalties through this award-winning lender.
    $5,000
    $300,000
    2+ years in business; $75,000+ in yearly sales; No bankruptcies or tax liens; At least 20% ownership of your business; Fair or better personal credit
    LoanBuilder, A PayPal Service Business Loans
    $5,000
    $500,000
    Annual business revenue of at least $100,000, at least 1 year in business, personal credit score of 600+.
    National Business Capital Business Loans
    Get a large business loan to cover your financing needs, no matter what the purpose is.
    $10,000
    $5,000,000
    Your company must have been in business for at least 6 months and have an annual revenue of at least $180,000.
    Kabbage Small Business Line of Credit
    A simple, convenient online application could securely get the funds you need to grow your business.
    $2,000
    $250,000
    Must have been in business for at least 1 year. Revenue minimum is $50,000 annually or $4,200 per month over the last 3 months.
    SmartBiz SBA Loans
    Get funding for your small business with a government-backed loan and extended repayment terms.
    $30,000
    $5,000,000
    Personal credit score of 650+; US citizen or permanent resident; Business must be 2+ years old; Annual revenue of $50,000+; No outstanding tax liens; No bankruptcies or foreclosures in past 3 years.
    Excel Capital Management Small Business Loans
    Get personalized financing options that suit your unique business needs in just a few simple steps.
    Varies by loan type
    Varies by loan type
    Your business must operate in the US, be at least 1 year old and have monthly revenue of $15,000+.

    Compare up to 4 providers

    Rates last updated February 21st, 2018

    Reveal your potential loan offers and rates

    Answer two quick questions to filter the loan offers and get the best one for you.

    Let's get started

    Select your credit score range

    I don't know my credit score

    Finally, select where you live.

    To get your credit score:

    Experian logo

    Experian is a leading provider of personal and business credit reporting. Find out your FICO score now for less than the cost of a cup of coffee.

    Unfortunately, none of the personal loan providers offer loans for that credit score. If you are in urgent need of a small loan, you might want to consider a short term loan.
    Name Product Product Description Min. Credit Score Max. Loan Amount APR
    Even Financial Personal Loans
    Get connected to competitive loan offers instantly from top online consumer lenders.
    580
    $100,000
    From 4.99% (fixed)
    LendingClub Personal Loan
    A peer-to-peer lender offering fair rates based on your credit score.
    660
    $40,000
    From 5.99% (fixed)
    CompareFirst Personal Loans
    An easy-to-use loan connection service geared toward introducing first-time borrowers to affordable personal loans.
    580
    $100,000
    From 2.99% (fixed)
    Upgrade Personal Loans*
    620
    $50,000
    From 5.66% (fixed)
    Laurel Road Personal Loans
    Get a personal loan with no application or origination fees and a rate discount for autopay.
    680
    $45,000
    From 5.5% (fixed)
    FreedomPlus Personal Loans
    Consolidate debt and more with these low-interest loans. Cosigners welcome.
    640
    $35,000
    From 4.99% (fixed)
    Best Egg Personal Loans
    640
    $35,000
    From 5.99% (fixed)
    Prosper
    Borrow only what you need for debt consolidation, home improvements and more — with APRs based on overall creditworthiness.
    640
    $35,000
    From 5.99% (fixed)
    LendingPoint Personal Loans
    Get a personal loan with reasonable rates even if you have a fair credit score in the 600s.
    600
    $25,000
    From 15.49% (fixed)
    NetCredit Personal Loan
    Check eligibility in minutes and get a personalized quote without affecting your credit score.
    550
    $10,000
    From 34% (fixed)

    Compare up to 4 providers

    Do business loans or personal loans offer better flexibility?

    Business loans

    • Lenders are likely to enforce strict limits in the first 12 months of your loan, but if you can back up your initial projections you could well be granted an increase in your funding amount.
    • You will need to use the entire loan amount for business purposes.

    Personal loans

    • It’s possible to borrow more funds from a lender, but you may have to have paid a certain amount of your existing loan first.
    • Funds can be used for business purposes as well as for other personal needs.

    Should I get a secured or unsecured loan?

    • Business loan. Deciding between a secured or unsecured business loan will often depend largely on the amount of money required. Many lenders require newer business owners to provide collateral for loans, or only offer unsecured lines of credit. However, there are now a number of online lenders offering unsecured loans. Keep in mind that these unsecured loans can come with higher rates, so if you do you have collateral to offer, you may want to consider applying for a smaller loan or comparing other financing options that don’t require collateral.
    • Personal loan. Similar to business loans, secured personal loans tend to come with lower rates. However, if the business fails and you’re unable to make repayments, the lender can take possession of your collateral.

    Compare secured vs. unsecured personal loans

    Other factors to consider

    • Sole proprietor or partnership? There are reasons why a business loan would most likely be better suited to a company run by partners. However, a sole proprietor may appreciate the control they have over a personal loan, which will likely involve a smaller sum of money.
    • The length of the loan. For a shorter period, the lower rates of a personal loan might hold more appeal. However, over an extended period, for example, 10 years, this advantage might be overshadowed by the ease of use offered by a business loan.
    • The age of the company. One of the most common issues with a business loan is getting access to it in the first place. If your business is less than a year old, you could compare startup loans or consider personal loans for business use.

    Compare business loans to more financing options

    Business loan vs. Line of credit
    Business loan vs. Business credit card
    Business loan vs. Angel investor
    Business loan vs. Merchant cash advance
    Business loan vs. Home equity loan
    Personal Loan vs. Home equity line of credit

    Frequently asked questions

    Was this content helpful to you? No  Yes

    Ask an Expert

    You are about to post a question on finder.com:

    • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
    • finder.com is a financial comparison and information service, not a bank or product provider
    • We cannot provide you with personal advice or recommendations
    • Your answer might already be waiting – check previous questions below to see if yours has already been asked

    Finder only provides general advice and factual information, so consider your own circumstances, read the PDS or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms and Conditions and our Privacy Policy.
    Go to site