Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.

Personal loan vs. business loan

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

You may be deciding between a personal loan versus a business loan to take your company to the next level. A sudden spike in sales might have created a need for some additional cash flow, or maybe that influx has created the desire to expand. While a tailored business loan would seem to be the obvious choice, many smaller businesses still choose personal loans, favouring their simplicity and easy applications.

Here’s a closer look at how personal loans and business loans differ.

Main differences between a personal loan vs business loan

Business loansPersonal loans
APRHow business lenders charge for their loans can vary widely. Some offer interest rates as low as 4% or 5%.Both fixed and variable interest rates can be offered. Some lenders offer a starting APR as low as 3.75%.
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 10 or 15 years with CSBFP loans (depending on whether the funds are used for equipment or real property).Repayment periods are usually between 3 and 5 years.
Loan AmountMaximum loan amounts for small businesses can be as high as $1,000,000, while loans for bigger business can reach multiple millions of dollars.Maximums can often run as high as $50,000, but it may be possible to find loans for higher amounts if your credit is good.
EligibilityYour business finances are usually weighed more heavily than your personal finances. Typically requires you to have been in business for at least 1 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 preapproval.
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.

Compare your options for business loans and personal loans

Name Product Interest Rate Loan Amount Loan Term Minimum Revenue Minimum Time in Business Loans Offered
SharpShooter Funding Business Loan
Prime pricing from 9.00%
$500 - $250,000
6 - 120 months
$10,000 /month
100 days
Unsecured Term, Merchant Cash Advance, Invoice Factoring
To be eligible, you must have been in business for at least 100 days with a minimum of $10,000 in monthly deposits.

SharpShooter provides capital to small businesses that are underserved by banks and credit unions. It measures overall business health and potential rather than focusing strictly on traditional metrics. Fill out a simple application and get pre-approved in minutes. Receive your funds within 24 hours.
Swoop Funding Business Loan
4.00% - 25.00%
$1,000 - $5,000,000
3 - 60 months
$10,000 /month
24 months
Term, MCA, LOC & more
To be eligible, you must have been in business for at least 24 months and have a minimum of $100,000 in annual revenue.

Swoop partners with banks and alternative lenders to match your business with the right funding options. Register for free and browse your offers without affecting your credit score.
Lending Loop Business Loan
Starting at 4.96%
$10,000 - $500,000
3 - 60 months
$8,500 /month
12 months
P2P
To be eligible, you must have been in business for at least 12 months and have a minimum of $100,000 in annual revenue.

Lending Loop is Canada’s first regulated peer-to-peer lending platform. Complete an application in 5 minutes. Once you accept your loan offer, investors will begin to fund your loan on the marketplace. Your loan will be transferred to your bank account when it is fully funded.
OnDeck Business Loan
8.00% – 29.00%
$5,000 - $300,000
6 - 18 months
$10,000 /month
6 months
Secured Term, Line of Credit, Merchant Cash Advance
To be eligible, you must have been in business for at least 6 months with a minimum monthly revenue of $10,000.

OnDeck offers fast and simple financing. Apply in less than 10 minutes with your basic business information and see your loan offers without hurting your credit score. Get approved within 1 business day, and choose your term, amount and payback schedule once approved.
Loans Canada Business Loan
Prime Pricing from 9.00%
$2,000 - $350,000
3 - 60 months
$4,166 /month
100 days
Unsecured Term
To be eligible, you must have been in business for at least 100 days, have a credit score of 410+ and show a minimum of $4,166 in monthly deposits ($50,000/year).

Loans Canada connects Canadian small business owners to lenders offering financing up to $350,000. Complete one simple online application and get matched with your loan options.
loading

Compare up to 4 providers

Name Product Interest Rate Loan Amount Loan Term Requirements Credit Score Link
LoanConnect Personal Loan
Secured from 1.90%, Unsecured from 5.75%-46.96%
$500 - $50,000
3 - 120 months
Currents debts must total less than 60% of income
Min. credit score: 300
Go to site
More Info
An online broker who helps inform clients towards better finances. Get pre-approved by different lenders for unsecured or secured loans in 5 minutes with any credit score.
goPeer Personal Loan
8.00% - 31.00%
$1,000 - $25,000
36 - 60 months
Recommended income of $40,000 /year
Min. credit score: 600
Go to site
More Info
Canada's first regulated consumer peer-to-peer lending platform offering unsecured loans. Connects creditworthy Canadians looking for a loan with Canadians looking to invest. goPeer strives to offer the most competitive interest rates. Apply in minutes and get a response within 24 hours.
Spring Financial Personal Loan
17.99% - 46.96%
$500 - $15,000
9 - 48 months
Min. income of $1,800 /month, 3+ months employed
Min. credit score: 400
Go to site
More Info
An online lender offering unsecured personal loans and credit builder loans. Those filing for bankruptcy or a consumer proposal can also apply. If you're not eligible for an unsecured loan, you may be offered a loan to help rebuild your credit.
ConsumerCapital Personal Loan
19.99% - 34.99%
$1,500 - $12,500
24 - 60 months
Min. income of $1,900 /month, 6+ months employed
Min. credit score: 600
Go to site
More Info
An online lender that provides fast unsecured personal loans. Complete an application in less than 10 minutes and get a decision within 24 hours. For faster loan approval, complete the Flinks bank integration in the app.
SkyCap Financial Personal Loan
12.99% - 39.99%
$500 - $10,000
9 - 36 months
Min. income of $1,200 /month, stable employment
Min. credit score: 550
Go to site
More Info
An online lender offering unsecured personal loans to borrowers with a wide range of credit scores. Apply in less than 5 minutes and if approved, receive financing in as little as 24 hours.
FlexMoney Personal Loan
18.90% - 46.93%
$500 - $15,000
6 - 60 months
Min. income of $2,000 /month, 3+ months employed
Min. credit score: 500
Go to site
More Info
An online lender offering flexible unsecured loans. Apply in less than 10 minutes and if approved, receive financing in as little as 24 hours. Pay off your loan at any time.
Loans Canada Personal Loan
Secured from 2.00%, Unsecured from 8.00% to 46.96%
$300 - $50,000
3 - 60 months
No min. income or employment requirements
Min. credit score: 300
Go to site
More Info
An online broker with the largest lender network in Canada. Get matched for free with lenders offering both unsecured and secured loans through one quick application regardless of your financial situation.
OFFER
Mogo Personal Loan
9.90% - 46.96%
$200 - $35,000
6 - 60 months
Min. income of $13,000 /year
Min. credit score: 500


Mogo offers a 100-day money-back guarantee. If you're not happy with your loan, pay back the principal and get your 100 days of paid interest and fees back.
Go to site
More Info
An online lender who aims for a hassle-free process through same-day unsecured loan approval and funding. Get a loan fast and track your credit score for free.
Fairstone Personal Loan (Unsecured)
26.99% - 39.99%
$500 - $25,000
6 - 60 months
Able to make monthly repayments on your loan
Min. credit score: 560
Go to site
More Info
An online lender with a team dedicated to professional service. Get a quote for an unsecured loan without impacting your credit score. Receive funds within as little as 24 hours. No prepayment fees.
Fairstone Personal Loan (Secured)
19.99% - 23.99%
$5,000 - $50,000
60 - 120 months
Must be a homeowner
Min. credit score: 560
Go to site
More Info
Use your home equity to get a secured loan up to $50,000 with flexible repayment options and a long loan term. Get a quote without impacting your credit score.
Loan Away Personal Loan
19.90% - 45.90%
$1,000 - $5,000
6 - 36 months
No min. income or employment requirements
Min. credit score: 300
Go to site
More Info
A lender that approves unsecured loans in as little as 20 minutes. Get affordable monthly repayments with any credit score.
loading

Compare up to 4 providers

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

  • Personal loan. You can apply for a personal loan in just a few minutes, with many different lenders available to you, from banks to credit unions and online lenders. 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’ll likely need bank statements and/or your Notices of Assessment from the last 2 tax years.
  • Business loan. The business loan process is more rigorous. 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. They may even ask you to list business assets, such as office equipment and vehicles, in case you may need to secure your loan. However, many online business lenders only require records of your business’s financial information.

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 may be able to borrow with a personal loan is up to $50,000, although most lenders offer lower maximum amounts. If your business requires more financing, it could be cumbersome to take out multiple personal loans from different lenders. Bear in mind that this will result in multiple credit checks, which could temporarily lower your credit score.

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 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 2 applicants, although some may allow more.

Which offers 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

What can I use a personal loan for?

A personal loan can be used for a number of expenses, from consolidating debt to financing a wedding to paying for a big home improvement project. Many lenders offer amounts as low as $1,000 to $10,000, and you can find options as high as $100,000.

In order to qualify for the highest loan amounts at the lowest interest rates, you’ll need to have an excellent credit score and a regular source of income that shows you have an ability to handle the monthly payments.

Can I use a personal loan for business expenses?

Yes. You can use a personal loan to cover a business expense, but you should understand the risk: if you default, the bank or financial company you borrow from may seize your personal assets rather than the assets of your business. In short, you may be putting your personal assets, such as your home and your car, on the line for your business.

However, if you’re just getting started on your business, a personal loan may be easier to qualify for than a business loan. This is because you’ll be applying using your credit history rather than the credit history of your business, and you can start on the road to financing your business venture even if you don’t currently have capital or collateral to secure a business loan.

What can I use a business loan for?

A business loan is meant to finance a business expense. Because this category is so broad, it can pretty much be used for anything that relates to your business. There are loans meant for specific purposes, like getting an advance on your invoices or buying equipment, but there are also term loans that are given as a lump sum and can be used for whatever your business needs.

Many banks or financial companies will want you to have a plan in place that details how you’re going to use the loan, and your approval will be based on both your personal credit and your business’s income and age.

Can I use a business loan for personal expenses?

It depends on the personal expense you’re planning on using the loan for, but in general, it’s not recommended. Accountants and lawyers both recommend that you keep your business finances and personal finances separate to make it easier for you to track expenses and inform the CRA of your different streams of revenue.

In addition, your business loan contract may specify a specific use for your loan funds. If this is the case, using your loan funds for any other purpose, even if it’s related to your business, might constitute a breach in contract that could result in penalties, or worse – put your loan in default.

Should I take out a personal loan or a business loan?

Consider a business loan if…
  • Your business has an established financial history
  • You need to fund a specific business expense or take out an advance on an invoice
  • You want to build a relationship with your bank or financial company
  • You need to take out a large loan that a personal loan won’t cover
  • You have collateral from your business to use for the loan
Consider a personal loan if…
  • Your business is new and hasn’t built credit
  • You’re comfortable risking your personal finances for your business
  • You have excellent credit and can get a lower rate with a personal loan
  • You need to cover both personal and business expenses

When is a personal loan better for my business?

There are times when personal loans are simply a more reasonable option for a business. Although it puts your name and credit on the line, a personal loan has fewer restrictions than a business loan and is generally easier to qualify for.

You’ve got a new business

There are few options for businesses that have recently opened. This is because your business doesn’t have a history of revenue and lenders can’t be certain you’ll be around long enough to repay your loan.

Even if you’ve found a lender willing to loan your business money, you may not find better interest rates than if you went with a personal loan.

You need quick funding

Business loans that don’t rely on your revenue take a while to process. It can be weeks or even months before you see your loan funds deposited into your account, and this is after you’ve spent valuable time crafting a business plan that showcases how you intend on using the loan.

A personal loan takes very little time, and many online lenders don’t require you to submit extra paperwork to justify the loan’s purpose.

Your business doesn’t have collateral

Your business may have little to no collateral to provide as security for a business loan. This means higher interest rates and, usually, a personal guarantee that holds you and your partners responsible should your business default. It also means that you may not be able to access larger amounts offered by business loans since lenders will want to ensure you have liquid assets to cover your full loan amount.

Personal loans don’t require collateral. They’re unsecured, and if you have a high enough credit score, you may be able to borrow up to $100,000. Many personal loans also allow you to apply with a cosigner, which can increase your likelihood of being approved for a large amount at a low interest rate.

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 other financing options

Line of credit
Business credit card
Angel investor
Merchant cash advance
Home equity loan

Frequently asked questions

More guides on Finder

Ask an Expert

You must be logged in to post a comment.

Go to site