what is a personal business loan?

A personal business loan is a loan used for personal business expenses, and for which the business owner is personally liable.

The technological advancements have made it easy for small business owners to get quick access to multiple financing options when they need quick capital for business growth. If you have trouble qualifying for a small business loan, consider a personal business loan for your small business.

PROS

Quick Loan Processing Personal loans get funded within 24 hours, whereas a business loan process takes weeks to complete.

Accessible for Startups Since you’re personally liable for the loan, your business credentials don’t matter.

Lower Interest rates You can get lower rates on a personal business loan with a good personal credit score.

Affordable Repayment Terms Some business loans have daily or weekly repayment terms. Personal business loans have monthly repayment terms.

Lower APRs With a good personal credit score, you can get a low annual percentage rate (APR) starting from 5% or 7%. Most online business loan lenders have APR rates starting at 10% or 20%.

Loan Usage You have the flexibility in how you use the funds. You can use the cash for both business and personal expenses.

CONS

Lower Loan Amounts With a business loan, you can secure cash up to $500,000. A personal business loan offers lower loan amount up to $40,000.

Personal liability If you’re unable to repay the loan, you’ll be risking your personal assets. You have to repay, whether your business doesn’t become profitable or you decide to shut it down.

Less support Mist business loans lenders offer tools and expertise to help grow your business. With a personal business loan lender, you usually don’t have the same business support.

Hurting Credit Score If you’re unable to repay the loan, your personal credit score will get hurt. Any missed or late payments will be marked on your credit report.

No Tax Deduction Interest on personal business loans isn’t tax-deductible.

How Do Personal Business LoansWork?

There’ a difference between personal business loans and standard business loans. When you apply for a business loan, lenders typically ask for extensive paperwork including a solid business plan, personal and business credit scores, business licenses, years of financial statements and tax returns and collateral in case of secured business loan.

With a personal business loan, your business’s credit history and financial statements are not required. Lenders usually scrutinize your personal finances including your income and credit history. This is because you’ll be personally liable for the loan. Once approved, you can use the funds for a variety of purposes. A personal business loan is the most suitable option especially for new businesses that don’t have the necessary credentials to get traditional funding. Applying for a personal business loan is just like applying for a personal loan for personal expenses.

How to Qualify for Personal Loan for Business?

The qualification criteria for a personal loan for business varies by the lenders.

Lenders generally consider your income and credit score to determine your creditworthiness. If you have a personal credit score of 500+, you can easily get approval for a personal loan. However, for a lower interest rate and fees, you will require a significantly stronger credit score. A FICO score of 700+ will likely get you a better loan deal.

If your credit score needs improvements, consider paying off your debts. Your history of timely debt payment is the most influential aspect of your credit score. If late payments are marked on your credit report, dispute them and try to have them removed.

The total amount of debt you owe and your revolving credit utilization is another important factor of your credit score. Your next step should be to reduce your credit utilization to below 30% to see improvements in your credit score.

Get Personal Business Loans from Merchant Advisors

Becoming a business owner isn’t as easy as it looks—but the rewards can be infinite. If you need funding to grow your small business, you’ve come to the right place. Our personal business loans are a great alternative to traditional loans when your small business doesn’t have an established history, or you are unable to provide the needed credentials a bank requires to approve you for a small business loan.

Applying for a personal business loan is simple: fill the online loan application and we’ll get back to you with your funding options. Once approved, the funds will be transferred to your bank account.