As consumers, most people are familiar with personal loans. You may have taken out a personal loan to consolidate debt, pay for a wedding or vacation, or to cover medical expenses. But as a small business owner, have you considered taking out a personal loan for your business? Personal loans offer advantages for certain business owners, but may not be right for everyone. Understanding your funding needs and knowing your personal and business credit ratings are essential in determining if using a personal loan for your business would be the right move.
LendRev can provide access to capital fast because we offer a direct path to the lending marketplace, empowering businesses like never before. Just complete one free application and LendRev gets to work, searching our network of lending partners where they compete for your business.
Fill out a single, free online application*
Speak with your personal funding coordinator
Receive same-day approval with proper documentation†
Receive the funding you need in as little as 24 hours‡
This type of financing provides a range of advantages over traditional loans.
Maximum amounts $35,000-$50,000
600+ for most lenders
Regular, monthly payments
As little as 4 days
|Personal Loan||Business Loan|
|With a good credit score, you may be able to secure a personal loan without collateral.||Business loans require collateral, regardless of your company’s credit score.|
|Personal loans rely on your personal credit score for approval.||Business loans rely on your company’s credit score.|
|Documentation required for personal loans typically includes your pay stubs, tax returns and credit reports.||In addition to your business’s credit history and tax returns, lenders will also want to see several years of financial statements, and possibly business plans and contracts with vendors and customers.|
|Funds from approved personal loans may be available in a matter of days.||It can take several weeks, or even months, to receive funding.|
|Personal loans don’t require follow-up from the lender, as long as payments are made according to the loan’s terms.||Lenders may require annual reevaluations of your company’s financials.|
|Interest rates are typically lower and terms longer, depending on your personal credit score and availability of collateral.||Business loans have higher interest rates and shorter terms, depending on the collateral pledged and the maturity of the business.|
|Personal loans don’t typically require a guarantor who will assume responsibility for the debt if you default.||Business loans usually require owners to sign as guarantors, putting both their personal and business assets at risk in case of default.|
Simply put, a personal loan is funding provided to an individual by a lending institution at a cost (i.e. interest). Personal loans are also referred to as consumer loans.
Personal loans may be secured or unsecured, meaning that you may/may not be asked to put up collateral to secure the loan. Secured loans have the benefit of lower interest rates because the risk to the lender is reduced. If you fail to pay, the lender can take possession of your pledged assets to cover their loss.
If you’re willing to pay a higher interest rate, an unsecured personal loan does not require collateral to secure the loan. Although you won’t forfeit any assets in the event of a default on an unsecured personal loan, defaulting on either type of loan will impact your personal credit score, making it more difficult for you to be approved for credit cards, car loans, apartment rentals and home mortgages.
As with any financial product, it’s extremely important to research your options. Be sure that you fully understand the terms of your loan and the repercussions of default. If you have any reservations or questions, consult a licensed legal and/or financial professional.
To apply for a personal loan, you would submit your application along with documentation of your income and debt, including pay stubs and tax records. The lending institution will evaluate that information alongside your credit score. If approved, you will be provided the agreed upon amount, minus closing costs. You then make regular, monthly payments on the principle and interest, according to the terms of your loan, until the balance of the loan is paid off.
LendRev can help you get a personal loan to use for your business by connecting you with our extensive network of vetted lenders – all by submitting a single, free application. You’ll be able to speak one-on-one with one of our personal funding coordinators to go over your offers, have your questions answered, and receive assistance with completing the funding process.
As long as you have a personal credit score of 600 or above, a personal loan is easier to get than a traditional business loan, and it requires far less documentation. However, if your personal credit score is below the 600 mark, alternative lending products would typically be easier and faster to obtain, although they may come with a higher price tag.
Using a personal loan to cover business expenses works best for owners who have a personal credit score of 600 or more.
Personal loans are also a good option for start-ups and younger companies that have yet to establish their credit history. Likewise, relying on the owner’s personal score for approval is a good move for more mature companies with rocky credit histories.
Because personal loans have lower maximum amounts available, they might not be the right choice for your company if you need a large influx of capital to cover major expenses.
* In order to secure funding, LendRev requires at least three months in business with a minimum of $10,000 in monthly revenue.
† With the appropriate information and documentation available, it’s possible to have your application approved in as little as one hour.
‡ Many of our term loan and merchant cash advance providers can be very fast, providing funds in as little as 24 hours. SBA-backed lenders may take two weeks or more because Small Business Administration loans require significantly more documentation.