Can you use a personal loan for your small business?

Find out if you can use a personal loan to grow, expand or get your small business off the ground.

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Starting a business can take its toll on you financially. You’ve probably already done the planning and the paperwork, but how do you go about actually getting your products or services in front of the masses?

To be eligible for a business loan, you’re usually required to be in business for a specified period of time, whether it’s one or two years. Between this requirement and minimum annual revenue eligibility, it can feel impossible to get funding for your startup.

That’s where personal loans come in. These types of loans are taken out by you as an individual, which means the finances of your business are not a concern. Instead, your ability to repay your loan and your creditworthiness are what lenders take into account.

Mogo Personal Loan

Mogo Personal Loan


5.9 % p.a.


  • Borrow from $2,000
  • Simple online application
  • Free credit score upon account creation

Mogo Personal Loan

Apply today to get approved for a personal loan up to $35,000 on flexible terms.

  • Max. loan amount: $35,000
  • Loan term: 1-5 years
  • Turnaround time: Same day
  • APR: 5.9% - 46.96%
  • Fees: NSF fee - $20 to $48
  • Quick pre-approval
  • Automatic payments
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Can I actually use a personal loan for business?

The short answer is yes, you can use a personal loan for your business needs.

While personal loans can generally be used for any legitimate reason, including financing a business, you should consider the conditions they could come with. The biggest one is that your name – not your business name – is attached to the loan. This means as an individual, you are liable for the loan.

Personal loans also rely on your credit score to determine what you will pay in interest and fees. You may have the option of a secured personal loan, but it’s less likely that you’ll need to provide collateral with a personal loan than with a business loan.

Compare personal loans you can use for business

Name Product Interest Rate Min. Loan Amount Loan Term Min. Credit Score
19.99% - 23.99%. Varies by loan type and province
3-10 years
Fairstone offers secured personal loans up to $35,000.
5.9% - 46.96%
1-5 years
Mogo offers loans up to $35,000 on flexible terms.
18.9% - 54.9%
1-5 years
An established online lender with loans up to $10,000. Now accepting applicants on El and Social Assistance.
$100 (in store), $500 (online)
6 months - 5 years
Cash Money offers installment loans up to $10,000 for AB, MB and NB residents.
$100 (in store), $500 (online)
6 months - 5 years
Cash Money offers line of credit loans up to $10,000 fo AB and ON residents.
9.47% - 20.07%. Varies by loan size (excluding Quebec)
3-5 years
A loan that you repay before gettּing access to the funds. Enjoy no upfront fees and a low interest rate.
19.99% - 46.93%
No end dates
Borrow up to $15,000, based on your income and credit history, with a personal line of credit from LendDirect.
43% (British Columbia and Ontario) and 34.9% (Quebec)
1-5 years
LendingMate offers loans to Canadians with poor credit with no credit checks.

Compare up to 4 providers

Quick facts about personal loans for business

  • How much can I borrow? Up to $35,000, sometimes higher.
  • How long is a typical loan term? 1 to 5 years, sometimes more.
  • What rates can I expect? 4% to 36%, depending on your personal credit score.
  • How fast can I get my money? Usually by the next business day.

What do I need to qualify?

To get the most competitive personal loan, you’ll generally need to have a credit score of 650 or higher, which usually means your credit score is good to excellent. Applying is fairly easy, although it will vary between providers. You can usually apply online, however if the lender has a physical branch location you can apply in person. Additionally, some lenders allow you to apply over the phone.

When applying for a personal loan, have the necessary information handy, including your personal information and financial details. Depending on the lender, your application could take as little as five minutes to complete.

What if I have bad credit?

Just one small hiccup and your creditworthiness can take a tumble. Luckily, there are ways to improve your credit score over time.

You can improve your credit score by doing things like:

  • Paying down your debt or open balances.
  • Making payments when they are due.
  • Keeping accounts open, even if you don’t use them, to increase your account history length.

However, you may not have time to raise your credit score. If you find yourself in this situation, you could consider applying for a bad credit personal loan. Bad credit personal loans should be considered carefully, as they tend to carry much higher interest rates and costs than those offered to people who have good credit scores.

Pros and cons of using a personal loan for a small business


  • Quick process. It often takes much longer to complete the process for a business loan, whereas some personal loans can be disbursed within just one business day.
  • Startup friendly. Since you’re personally taking on responsibility for the loan, your business doesn’t need to meet any requirements.
  • Low interest rates. A good or excellent credit rating of 650 or higher, can usually get you lower interest rates for personal loans. A business loan could be more costly if your business credit isn’t as healthy.
  • Reasonable repayment terms. With a personal loan, repayments are likely to be monthly, instead of weekly or bi-weekly.


  • Lower limits. Business loans can have large maximums, up into the hundreds of thousands of dollars. Personal loan maximums are generally limited to around $35,000.
  • Personal liability. You are liable as an individual to repay your loan in a timely manner. If your business doesn’t become profitable or you decide to close the business, you still have to pay back all of the loan.
  • Less support. With many lenders, getting a business loan also means gaining access to tools and experts to help you grow your business. You likely won’t get this same business support with a personal loan.

4 tips to get the most out of a personal loan

  1. Consider efficiency. Think about how each purchase you make with your loan will save you time and money, either in the long-term or the short-term. Remember that you will want to be efficient with both your time and your money.
  2. Go secondhand when you can. Some business machines are built to last and don’t need more than a few repairs to keep on running for decades. Some might even last longer than newer versions – a lot of new equipment is designed to become obsolete in a few years. Purchase secondhand if you can.
  3. Stock up with wholesalers. More inventory means more potential sales. Use your personal loan to take advantage of wholesaler deals to save on costs.
  4. Make an investment in marketing. Now that you have the goods, you need the customers. Investing in a marketing plan by hiring a consultant – or even doing it yourself – can more than pay for itself.

Alternatives to business loans

  • Investors. Angel investors and venture capital investors can provide financing in exchange for a portion of your business. However, this type of funding carries its own risks and rewards.
  • Credit cards. Personal and business credit cards could be a means of getting the financing you need. Plastic can be especially useful if you’re looking to make a big purchase. However, it can also be risky since you don’t physically have to hand over the money, and you may only realize what you’ve spent when you see the balance on the card statement.
  • Grants. Federal and private grants are available for many types of businesses and business owners, especially recent grads, entrepreneurs, women and minorities. Look into possible government grants and see if you are able to secure any additional funding.
  • Bootstrapping. Financing may not be necessary if you’re in a position where you can save up the money you need and fund your business with cash as it grows.

Bottom line

There are definite benefits to personal loans for business use, depending on your situation. Startups and business owners who only need a few thousand dollars of funding may find a personal loan better suited. Before you apply for a loan, take the time to compare your loan options in order to find the best loan for your needs.

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