Business loans offer better value and bigger amounts, but are harder to qualify for.
Personal loans are easier and faster, but have lower limits and higher rates that business loans.
New businesses usually start with a personal loan or credit card.
Established businesses should avoid using personal credit when possible.
Compared to personal loans, business loans offer a wider variety of loan types, higher loan amounts, more competitive rates and longer terms. But to qualify, you’ll likely need to be in business for at least a year or two with regular monthly revenue.
Personal loans like Upstart are generally easier to qualify for, especially if you have good personal credit and regular income. But borrowing amounts are limited, generally capping out $100,000 with shorter repayment terms of one to 12 years.
Here’s a breakdown of the main differences between business and personal loans, so you can make the right choice for your business.
Business loans vs. personal loans
Here’s a quick overview of the differences between business and personal loans.
Business loans
Personal loans
APR
Start around 6%
Start around 6%, averages 11.14%
Terms
18 months to 25 years
1 to 12 years
Loan amounts
Up to $5 million
Up to $100,000
Eligibility
1 year in business, $10,000 or more in monthly revenue
Good to excellent credit, regular source of income, low debt-to-income (DTI) ratio
Business loan vs. personal loan: 4 main differences
Here are four factors to consider when choosing between a business loan or a personal loan.
Lendio is a marketplace that allows you to apply once and browse multiple business loans your small business could qualify for. It has few requirements and a network of over 75 lenders, making it one of the most reliable ways to find funding. But the interest rates you face could be high, and Lendio faced action from the FTC in 2020.
Loan amount
$1,000 – $5,000,000
APR
Varies by lender
Min. Credit Score
580
Lendio is a marketplace that allows you to apply once and browse multiple business loans your small business could qualify for. It has few requirements and a network of over 75 lenders, making it one of the most reliable ways to find funding. But the interest rates you face could be high, and Lendio faced action from the FTC in 2020.
Pros
Large network of lenders
Quick funding options
Plenty of positive reviews
Cons
Government action in 2020
Potentially high interest rates
Loan amount
$1,000 – $5,000,000
APR
Varies by lender
Min. Credit Score
580
Loan term
3 months to 25 years
Requirements
Operate business in US for 6 months or more, have a business bank account, minimum 580 personal credit score, at least $8,000 in monthly revenue.
LightStream is frequently a top pick — and it deserves it. You won't find more competitive interest rates on a personal loan, and you could qualify for up to $100,000 for your small business. Just be prepared for a hard credit pull and stricter eligibility requirements than most other personal lenders.
Min. credit score
Good to excellent credit
APR
6.24% to 24.89%
Loan amount
$5,000 to $100,000
Not available in: Iowa, West Virginia
LightStream is frequently a top pick — and it deserves it. You won't find more competitive interest rates on a personal loan, and you could qualify for up to $100,000 for your small business. Just be prepared for a hard credit pull and stricter eligibility requirements than most other personal lenders.
Pros
Loans up to $100,000
Multiple APR discounts available
Extremely competitive rates
Cons
No preapproval process
Good to excellent credit required
Loan amount
$5,000 to $100,000
APR
6.24% to 24.89%
Interest Rate Type
Fixed
Min. credit score
Good to excellent credit
Turnaround Time
As soon as same day
Loan Term
24 to 240 months
Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Lowest rates require excellent credit. At least 27% of approved applicants applying for the lowest rate qualified for the lowest rate available based on data from 10/01/2024 to 12/31/2024. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice.
Payment example: Monthly payments for a $25,000 loan at 6.49% APR with a term of 3 years would result in 36 monthly payments of $766.11.
Maximum APR for a LightStream loan is 25.79%. Loan terms range from 24 - 240 months depending on the loan type.
A personal loan may be a better choice if the following factors apply:
Your business is new. Personal loans rely on your personal credit, making them a good option if your business hasn’t built a financial history yet.
You have excellent credit. High personal credit scores can get you lower rates and better loan terms than most startup business loans.
Need to cover both business and personal expenses. Personal loans are flexible, letting you handle multiple expenses or consolidate debt.
You need quick funding. Personal loans often fund within a week, making them ideal for fast access to cash.
You’ve built personal savings. Extra cash outside your business can help you qualify for a larger loan or better terms.
Are personal loans allowed for business use?
Some lenders let you use a personal loan for business purposes, while others don’t. If you use a personal loan in a way your lender forbids, you could run into problems like fees, penalties or even loan default. Always check the fine print before assuming it’s okay.
Personal loan vs. business loan: Taxes
Interest on a business loan is usually deductible, so you can subtract it from your business taxes and save money. Interest on a personal loan is generally not deductible, even if you spend it on business expenses. Choosing the right loan type can help you avoid unexpected tax costs and keep your business finances cleaner.
Frequently asked questions
Can I use a personal loan to start a business?
Yes, you can, but personal loans typically have lower limits and higher rates than business loans, so they’re best for smaller startup costs or short-term expenses.
How do lenders decide my eligibility for a business loan versus a personal loan?
Business loans usually require at least a year in business, steady revenue, and sometimes collateral, while personal loans focus mainly on your credit score, income, and debt-to-income ratio.
Can using a personal loan affect my business credit?
Personal loans generally don’t build business credit, so if your goal is to grow your business credit profile, a business loan is the better choice.
Megan B. Shepherd is a personal finance expert and editor for loans and insurance at Finder.
Her personal finance expertise has been featured on Forbes, Nasdaq, MediaFeed, Fox News, Time, Reviews.com, and carinsurance.com, adding invaluable information related to personal loans, financial strategies and smart borrowing tactics.
Megan graduated from the University of Texas at Dallas with a BS in Business Administration with an entrepreneurial focus. She's worked as a certified financial adviser and has earned certificates of completion from A.D. Banker & Company.
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Where to get a business loan in Florida and how to qualify.
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We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
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