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.
Yes, you can use a personal loan for your business needs. Personal loans can typically be used for any legitimate reason, including financing a business.
However, you should consider the conditions a personal loan 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 and will have to pay it back in full, whether that’s from your personal bank account or your business account. Personal loans also rely on your personal credit score to determine the loan terms and interest rates that you’re eligible for.
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Apply online in less than 10 minutes. If approved, receive funds in as little as 24 hours. Pay off your loan at any time.
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 rating is good to excellent. Applying is fairly easy, although it will vary between providers. You can usually apply online, over the phone or in-person if the lender has physical branch locations.
When applying for a personal loan, have the necessary information handy, including your personal information, employment information and financial details. Depending on the lender, your application could take as little as five minutes to complete.
Just one small hiccup and your credit score 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:
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 fees, as well as poorer terms, than those offered to people who have good credit scores.
No, since you’re using a personal loan, the interest is not tax deductible. Interest paid on personal loans is not tax deductible in Canada, since you’re using the funds for personal purposes.
Interest paid on loans is usually only tax deductible if it’s used for generating income (and it meets the CRA’s eligibility requirements). So if you took out a business loan to fund your small business expenses, you’d be able to deduct the interest from your business income. All interest that your business pays to finance its operations is usually tax deductible.
Since you’re able to deduct interest from your business income on your taxes, you will potentially save some money by choosing a business loan instead of a personal loan. That said, you’ll want to compare whether you’re actually eligible for a business loan – since the eligibility requirements can be harder to meet than a personal loan – and you’ll want to make sure you can get favourable interest rates and terms.
Compare both business and personal loan lenders to see which offers a lower APR and more competitive loan terms. You’ll then be well placed to make an informed decision that will save you money and provide you with the financing you need.
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 since they’re easier to apply for and provide fast funding. But business loans can help you build your business credit and the interest paid is tax deductible through your business income.
Before you apply for a loan, take the time to compare your options in order to find the best loan for your needs.
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