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By: rkapur
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Personal Loan For Business Use: Is It The Best Idea?

Using a personal loan for business purposes is possible for many entrepreneurs. In fact, that’s what helps companies that can’t access traditional commercial loans or don’t want to go through a bank loan process.

But the truth is that it might not always be the best option.

Fortunately for you, there are other alternatives out there.

In this article, we compare your options and give you other alternatives.

Apply For A Business Loan!

Can I Use A Personal Loan For Business Expenses?

Yes, you can use a personal loan for commercial expenses. However, there are a few things to keep in mind before doing so.

First, not all lenders will allow you to use a personal loan for business expenses. You’ll need to check with your specific lender to find out their policies.

Secondly, most personal loans are not typically tax-deductible. But interest rates on small business loans ARE tax deductible.

Finally, remember that using a personal loan for a business is directly tied to your personal credit score. You’ll need an excellent score to receive approval. And, if you miss payments or default on the loan, it will negatively impact your credit history.

If you’re considering using a personal loan for commercial expenses, carefully weigh the pros and cons before making a decision.

Pros And Cons Of Using A Personal Loan For Business Purposes


  • Less paperwork. Personal loans usually involve minimal documentation. You don’t need to provide your company balance sheet or business plan. A lender could offer a personal loan based on your credit history and income.
  • Lower rate of interest. Using a personal loan for business could help lower your interest cost. A personal loan could be a much cheaper option if you haven’t build business credit.
  • Quick approval. If you meet the lender’s personal loan requirements, the process could take just a few hours! That said, some small business loans can also be super fast, too. With Camino Financial, you receive an approval within 2 to 4 days.
  • Available to businesses that can’t get a traditional business loan. Most small business lenders don’t advance funds to startups or companies that have existed for a short period. If you fall in this category, using a personal loan for business could be a good option.

At Camino Financial, we only require 9 months active and registered instead of the 2 years required by most commercial lenders.


  • There’s a limit to the amount that you can raise. Business loans could be for large sums (up to $500,000). On the other hand, personal loans are only up to $50,000.
  • It doesn’t help to build your business credit; it will only affect your personal credit. This will prevent your venture from establishing its credit history.
  • The amount you can raise depends on your income level, not your business’s potential or needs. So, if you need an investment that exceeds what your income justifies, a personal loan won’t help.
  • You’re mixing up your personal and commercial expenses. Using a personal loan for business can create accounting and tax issues. Additionally, a bank statement that includes personal and commercial expenses would create a poor impression.

Commingling is the practice of mixing personal and business expenses.

Getting a business loan is better

Business Loan vs. Personal Loan: At A Glance

personal loans vs business loans infographic

What’s The Difference Between A Personal Loan And A Business Loan?

Here we’re comparing business loans vs. personal loans so you can decide which one best fits your needs.

Business Loans

Commercial loans are a type of financing specifically designed to help businesses grow and succeed.

Small business loans are for business-related expenses only. For example, equipment purchases, leasehold improvements, working capital, or even real estate transactions.

Loan Amount

The amount you can borrow depends on the lender’s judgment of your company’s ability to repay. This will depend on your cash flow, business credit history, and profitability.

Business loan amounts range widely. They can be as small as $5,000 and go up to millions of dollars. Others, like SBA loans, are available for sums up to $5.5 million.

If you need a large amount of capital, a small business loan is your best option.

Terms And Rates

Rates: 3% to 60%

Terms: 1 to 10 years

Use Of The Funds

You can use it to buy inventory, pay your employees, purchase capital equipment, or cover marketing campaign costs. You must spend the money in a manner that benefits your business.

Requirements And Documentation

Broadly speaking, a traditional business loan has more requirements than a personal loan. Why? Because the lender is underwriting the business and the individual.

Your lender will require at least to:

  • check your credit
  • review your business bank activity
  • have proof of your business registration

The same goes with the paperwork and the number of documents needed to approve your application. They can vary depending on the lender you approach.

But remember that business loan requirements and the number of documents vary broadly from lender to lender. Some lenders are more flexible than others.

For example, alternative lenders like Camino Financial only require nine months active and registered instead of the usual two years for most lenders. And they require practically half the amount of documents as most lenders.

A business lender may check your personal and business credit score. You’ll need a personal minimum credit score of around 640 to 700 and a business score of 80 or above.

Not all commercial lenders will check will business credit score.


There are both secured and unsecured business loans. Secured loans require you to put up collateral in the form of business assets.

Also, most business loans require a personal guarantee, which is a pretty weak form of collateral since it would require the lender to go to court to seize the borrower’s assets.

Camino Financial microloans don’t require collateral.

Process And Approval

The lender will conduct a detailed credit appraisal and decide based on your company’s strengths.

Banks and other traditional financial institutions may take weeks or even months to approve your loan. But online lenders are a popular alternative for the easy and quick process.

With Camino Financial, you could receive your funds within 2 to 10 business days.

Apply For A Camino Financial Loan!

Personal Loans For Business

A personal loan is a fixed-term financial product designed to help applicants pay for almost all personal expenses. The lender sets the repayment schedule and interest rates in advance, and the borrower repays the loan in equal monthly payments.

Some people use personal loans to invest in their businesses (and might refer to them as “personal business loans”).

Loan Amount

Lenders could impose a far lower limit. Most personal loans have a cap at $50,000, although it is possible to obtain approvals for higher sums. The average amount in a personal loan is about $8,000.

Terms And Rates

Rates: 6% to 36%

Terms: 3 to 5 years

Use Of The Funds

You can use it for practically any purpose. Like to pay for a holiday or make a down payment on your car.

You can also use it for your business (although it’s not recommended).

Requirements And Documentation

While in some cases, your lender may just need to review your credit report and check your pay stubs, they may request more documents (like financial statements) for larger amounts.

The rule of thumb is that the larger and cheaper the loan, the lender will ask for more documents.

Personal lenders will check your personal credit history. You’ll need a personal credit score of around 610 to 640.


There are both secured and unsecured personal loans. An unsecured personal loan won’t require you to pledge collateral; a secured one will.

Most personal lenders require a personal guarantee.

Process And Approval

The approval process for a personal loan is usually much faster than in most traditional business loans. You could receive funds in a few days if you have an approved application.

When To Use…

Use a personal loan for business purposes when:

  • You tried to but couldn’t get a business loan
  • Your business is new (that said, you could consider startup loans)
  • The lender doesn’t have any restrictions that will stop you from using it for business purposes
  • Need a smaller amount

Use a small business loan for business purposes when you:

  • Need a more significant amount of money
  • Have been in business for a while and have good financials
  • Need the loan for a specific purpose, like equipment, a vehicle (like semi truck financing), or inventory, for example
  • Need more time to repay the loan

How To Get A Loan To Pay For Business Expenses

The application process for both personal and business loans is quite similar. The biggest difference is the information you’ll provide:

  • For personal loans, you’ll only have to share info on yourself and your finances.
  • On the other hand, commercial loans will ask for both personal and business basic and financial information.

Here’s how to apply for a loan:

  1. When applying, you’ll need to provide personal and financial information. This can include contact information, income, and debts.
  2. You’ll also need to specify how much you want to borrow and what you’ll use the loan for.
  3. The lender might require additional documentation or permission to review your cash flow (sometimes through Plaid bank verification).
  4. Once you’ve submitted your application, the lender will review your information and decide whether or not to approve your loan.
  5. If approved, you’ll get a loan offer that includes the interest rate or APR, loan term, and monthly payment amount. You can then choose to accept or decline the loan offer.
  6. If you decide to accept the loan, you’ll need to sign some paperwork.
  7. Once everything is in order, the lender will deposit the money into your bank account, and you can start using it for your intended purpose.

Alternatives To Personal Loans For Business Use


Business microloans are loans typically used by businesses to finance smaller investments. You can use these loans for various purposes, including purchasing inventory, hiring new employees, or expanding your business.

While getting traditional bank loans can be challenging, business microloans are more accessible for small businesses.

Online lenders usually offer these loans.

The main advantage of taking out a business microloan is that it can help you expand your existing business without putting you in a lot of debt.

The Camino Financial microloan might be precisely what you’re looking for.

You can get from $5,100 to $35,000 with repayments of 24 to 36 months. Plus, thanks to our fixed monthly payments, you’ll always know how much to pay and can budget around it.

Our easy application and top-notch customer service differentiate us from the competition.

Get A Microloan

Business Line Of Credit

A business line of credit is a revolving loan that allows you to draw on funds up to a specific limit. You can use the amount you want (as long as it’s not bigger than the limit) and only pay interest on the amount of credit you actually use.

Entrepreneurs typically use business lines of credit for short-term financing needs such as working capital or seasonal expenses.

It is a flexible financing option for small businesses.

SBA Loans

Small Business Administration loans are a popular financing option for small businesses. They are loans backed by the U.S. government and offer some of the lowest terms, making them a good choice for many business owners.

There are two main SBA loans: 7(a) and 504 loans.

  • 7(a) loans are the most common type of SBA loan. You can use them for various purposes, including working capital, inventory, or equipment financing.
  • 504 loans are usually for real estate or machinery purchases.

To qualify for SBA guaranteed loans, though, you’ll need to meet very stringent requirements.

Working Capital Loans

Working capital loans are a type of loan that you can use to finance the day-to-day operations of a business.

The purpose of this product is to provide a small business with the funds it needs to cover its short-term expenses, such as inventory, payroll, and other operational costs.

You typically repay working capital loans over a shorter period than other types of loans, such as term loans or lines of credit. This is because they are for short-term needs and not for long-term financing.

Depending on the lender’s requirements, working capital loans can be either secured or unsecured.

Equipment Financing

Equipment financing loans are a great way to get your business’s equipment without having to pay for it all upfront.

With this type of loan, you can finance the purchase of new or used equipment over time, making it more affordable and allowing you to get the equipment you need right away.

There are a few things to keep in mind when considering an equipment financing loan.

First, you will need to have good credit to qualify.

Second, the interest rate on your loan will be higher than if you were to finance the purchase with a traditional loan.

Finally, you will need to make sure that the equipment you are purchasing is something that will hold its value over time so that you can eventually sell it or trade it in for a new piece of equipment.


Crowdfunding is the process of raising money for a small business venture or project by soliciting small amounts of money from a large number of people.

This type of funding has become increasingly popular in recent years, as it allows entrepreneurs to bypass traditional channels such as banks and venture capitalists.

Many different platforms facilitate crowdfunding, each with its own set of rules and regulations.

Businesses seeking crowdfunding must carefully consider which platform is right for them, as well as how much money they are realistically able to raise.

Crowdfunding can be an effective way to raise capital, but it is not without risk.

Business Credit Cards

A business credit card could provide you with the cash that you need.

Entrepreneurs make extensive use of this form of financing. The best business credit card issuers offer a range of benefits. It is advisable to choose your card carefully and pick one that will prove the most useful for your business.

The thing with a business credit card is that it’s not as easy to receive approval for either: it requires excellent credit scores, and sometimes it can have pretty hefty interest rates.

The Best Business Financing Alternative: Camino Financial

While it is possible to use a personal loan for business, a commercial loan will always be a superior alternative.

If your business needs a cash infusion, consider taking a Camino Financial microloan from Camino Financial.

You can get up to $35,000.

Camino Financial is more flexible than traditional lenders. We are open to extending finance to borrowers with no previous credit history, and we don’t ask for collateral.

Even better yet, if you don’t have an SSN, you can apply with your ITIN!

To us, you are our priority, and we want to see your business grow and succeed. Our guiding principle is our motto, “No business left behind,” which infuses everything we do.

Let us help you make your small business grow!

Apply now!



Which loan is best for business?

There are many factors to consider when deciding which loan is best for a business. The type of business, the amount of money needed, and the repayment schedule are all essential considerations.

In almost all scenarios, a business loan is the best option, though. This is because it’s specifically to help businesses and enables you to avoid commingling.

This lending product offers a fixed interest rate and a set repayment schedule and is available from several different lenders.

What company is the easiest to get a personal loan from?

Knowing where to turn when you require a personal loan can be challenging.

Many companies offer personal loans, but not all of them are equal. Some may have higher interest rates or stricter eligibility requirements than others.

Some of the best personal loans are:

  • SoFi
  • Marcs by Goldman Sachs
  • Upgrade
  • LendingCub
  • Discover personal loans
  • Prosper
  • Upstart

Is it easier to get a business loan or a personal loan?

It depends on the situation.

If you have a strong credit score and a solid business plan, it may be easier to get a traditional business loan. However, if you are starting a business with no collateral or a low credit score, it may be easier to get a personal loan.

Ultimately, it is vital to shop around and compare offers from multiple lenders before making a decision.

Are there personal loans for bad credit?

There are some personal loans for bad credit.

To qualify for one, you will typically need to pledge some form of collateral (such as a car or home). The interest rate on a personal loan for bad credit will be pretty steep.

Can you use a business loan for personal use?

No, you cannot use a business loan for personal use. Business loans are meant to be used for business purposes only. If you try to use a business loan for personal use, you may end up in hot water with your lender.

So, if you’re thinking about using a business loan to finance a personal expense, think again. You’ll need to find another source of funding to cover your personal costs.

Can a personal guarantee be enforceable for a business loan?

Usually yes. This means that if the business defaults on the loan, the individual who signed the personal guarantee will be responsible for repaying the debt.

It’s important to know that they are typically only enforceable up to the amount of the loan, so if the borrower defaults on a larger loan, the guarantor may not be liable for the full amount.

While personal guarantees can be enforceable, there are some circumstances where they may not be.


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