Can you use a personal loan for your small business?

Find out if a personal loan is an option for getting your business off the ground or expanding it.

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Starting a business is no small feat. 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 typically required to be in business for a minimum of a year, sometimes two years. Between this requirement and minimum annual revenue eligibility, it can seem impossible to get funding. But don’t give up – there are still options to explore.

Taking out a personal loan to fund your business might have crossed your mind, for instance. Because personal loan funds are transferred to you as an individual, the state of your business isn’t considered. Instead, providers will look at your personal credit score and financial circumstances. The downside is not all lenders will allow you to use a personal loan for business purposes.

Can I actually use a personal loan for business?

Yes you can – but you’ll need to do your research as many lenders will reject your application if you’re planning to use your personal loan to start a business. Major banks which offer both personal and business loans, for example, will prefer you to use personal loans for personal use, and business loans for business use.

One of the main personal loans you can use for business purposes is the government-backed Start Up Loan. This is designed to help those looking to start a business or grow an existing one, but it’s a personal loan. You can borrow between £500 and £25,000 over 1 to 5 years.

Should I use a personal loan for business reasons?

Before you use a personal loan for business purposes, there are some things you need to consider.

For a start, consider the conditions the loan could come with. The biggest one is that your name — not your business name — is attached to the loan. This means you will be personally liable for repaying the loan – not your business. If you fail to repay it, you could damage your personal credit score.

You should also be honest and upfront with your lender about the purpose of the loan. Some lenders may order you to pay back the loan immediately if they discover you misled them.

Using a personal loan for business reasons can make it more confusing when it comes to filing your tax return as there’s less of a distinction between your personal funds and your business money.”

Rachel Wait, financial journalist

Compare business loans

Table: sorted by loan terms, promoted deals first

1 - 3 of 3
Name Product Finder Score Loan type Loan amounts Loan terms Minimum turnover/trading criteria Key benefit
iwoca Flexi-Loan
Variable rate Unsecured loan
£1,000 to £500,000
1 to 24 months
£25,000 annual turnover,
6 months trading
Your business loan rate varies based on your circumstances. Interest applies only to your outstanding balance on days you use the loan – there are no early repayment fees. Limited companies only.
Representative example: Borrow £10,000 over 12 months at a rate of 40% p.a. (variable). Representative APR 49% and total payable £12,294.
Nest Unsecured Business Loan
Fixed rate Unsecured loan
£10,000 to £5,000,000
No specified loan terms
£200,000 annual turnover,
12 months trading
Portman Finance Business Loan
Fixed or variable rate Asset finance loan
£10,000 to £2,000,000
3 to 72 months
£100,000 annual turnover,
1 year trading
Representative example: Borrow £30,000 over 3 years at a rate of 7.26% p.a. (fixed). Total payable £36,537.84 in 36 monthly repayments of £1014.94.

What do I need to qualify?

To get the cheapest personal loans, you’ll generally need to have a good credit score. Applying is fairly easy through the lender’s website.

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

What if I have bad credit?

Life happens, and sometimes it leads to less-than-perfect credit. Luckily, there are ways to improve your credit over time. These include reducing your debts and keeping up with your payments.

You could also consider applying for a bad credit personal loan. However, be aware that they tend to have higher interest rates and costs, so they should be considered carefully. They also may not be approved for business purposes.

Are personal loans for business tax-deductible?

With enough documentation, interest payments on your loan can be treated as deductible business expenses when it comes to tax on your profits. If you want to do this, make sure you keep accurate records of what you spent the money on and how these payments relate to your business.

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


  • Quick process. It can take weeks to complete the process for a business loan, whereas some personal loans are funded within a business day.
  • Low interest rates. Good or excellent credit can typically get you lower interest rates for personal loans. A business loan could be more costly if your business credit isn’t as robust.
  • No collateral. Unsecured personal loans don’t require you to use an asset as security, whereas some business loans will. This means that with a personal loan, there’s no risk of losing that asset if you fail to repay your debt.


  • Lower limits. Business loans can allow you to borrow as much as a few million pounds. The personal loan maximum is generally around £30,000 or less.
  • Personal liability. You are personally liable for repaying your debt. 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 usually won’t get this same business support with a personal loan lender.

Other alternatives to business loans

  • Credit cards. Personal and business credit cards could be a means of getting the financing you need. Plastic can be especially useful if you need a short-term cash injection. However, unless you find a card with a 0% offer, interest rates can be higher than on loans.
  • Investors. Angel investors and venture capital investors can provide financing in exchange for a portion of your business. This type of funding carries its own risks and rewards, which you can read about in our guide.
  • Grants. Government grants are available for many types of businesses and business owners.
  • Crowdfunding. The practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet.
  • 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.
Capital on Tap Business Credit Card (+optional Business Rewards)

Business funding for the real world

  • Up to 1% cashback or 1 Avios per pound spent
  • Up to 10,000 bonus points when you spend £5,000 in 3 months
  • Unlimited free company cards for employees and partners
  • Up to 56 interest-free days on purchases each billing cycle

Representative example: When you spend £1,200 at a purchase rate of 35.15% (variable) p.a., your representative rate is 35.2% APR (variable). Optional upgrade to Business Rewards (£99 per year).

Bottom line

When borrowing money, you need to be honest about what you’re using it for, or your lender could demand you repay it all immediately. Many personal loans can’t be used for business purposes, but if you do your research, you might be lucky enough to find a lender that will let you use a personal loan to get your business up and running. Just make sure you check the eligibility criteria carefully and remember that you, not your business, will be responsible for repaying the loan.

How satisfied are borrowers with their lender?

Our survey showed that customer satisfaction levels are generally higher among business loan customers than personal loan customers.

ResponsePersonal loan users (%)Business loan users (%)
Very satisfied37.22%53.25%
Reasonably satisfied45.53%37.50%
Neither satisfied nor dissatisfied12.90%7.50%
Moderately dissatisfied2.61%1.25%
Highly dissatisfied1.74%0.50%
Source: Finder survey by OnePoll of 1,150 Brits

Frequently asked questions

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
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To make sure you get accurate and helpful information, this guide has been reviewed by Rachel Wait, a member of Finder's Editorial Review Board.
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Head of publishing

Chris Lilly is Head of publishing at He's a specialist in personal finance, from day-to-day banking to investing to borrowing, and is passionate about helping UK consumers make informed decisions about their money. In his spare time Chris likes forcing his kids to exercise more. See full bio

Chris's expertise
Chris has written 612 Finder guides across topics including:
  • Loans & credit cards
  • Building credit
  • Financial health

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