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Like any small business, a partnership can choose from several different types of business loans to meet financing needs, including a bank or Small Business Administration (SBA) term loan, a business line of credit, or a cash advance. It’s also possible for one partner to personally loan capital to the business. This type of partnership loan is treated in a similar way to a loan from a third-party lender.

Which type of partnership loan will work best for your business will depend on how much capital you’re looking for, how your partnership is set up, and the personal resources of each partner. Read on to learn how to get the right type of partnership business loan.

What Is a Partnership Loan?

A business partnership is a way of organizing a company that is owned by two or more people. The partners typically invest their money in the business (or buys into the partnership), and each partner benefits from any profits and sustains part of any losses.

When a partnership needs an influx of funds, say, to increase working capital or expand the business, it may choose to borrow money from a third party, such as a bank or online lender. If the partnership is new or has poor credit, however, it might have trouble qualifying for a small business loan with favorable rates and terms. In that case, one of the partners might choose to loan the partnership the money it needs. Either scenario can be considered a partnership loan.

If, at some point, the owners of a partnership decide to go their separate ways, one partner can typically buy out another partner by getting partner buyout financing.

How Partnership Loans Work

Taking out a loan from a third party in the name of the business works the same way as any small business loan. When applying for a business loan, the partners will likely need to provide business financial documentation and a business plan, as well as information about their own personal financials, including tax returns and personal financial statements.

If a loan is coming from one of the partners, the process involves drawing up paperwork to define the terms of the loan, including the amount, interest rate, and repayment schedule. If the business fails, the partner’s loan will be treated as a business debt that gets paid back before partner distributions of any profits.

In a general partnership, all partners are personally liable for all business debts. In a limited partnership, a limited partner can’t be forced to pay off business debts or claims with personal assets.

Loan Structure and Repayment Possibilities

Business partnership loans can be structured in several ways, including term loans, lines of credit, or SBA-backed financing, depending on the partnership’s needs and qualifications.

Repayment terms typically reflect the loan type and may involve fixed monthly payments over a set period or flexible payments tied to cash flow. Because multiple partners are involved, lenders often require a clear partnership agreement outlining ownership shares, repayment responsibilities, and what happens if one partner exits the business.

How Creditworthiness Is Assessed in a Partnership

When evaluating a partnership loan application, lenders usually consider both the business’s financial health and the personal credit profiles of each partner. This often includes reviewing individual credit scores, income, debt obligations, and personal guarantees, along with the partnership’s revenue, cash flow, and time in business.

Strong credit and financial stability across partners can improve approval odds and lead to better loan terms.

4 Types of Partnership Loans

There are many types of business loans available to partnerships. Here are some you and your partner (or partners) may want to consider.

1. Bank Loans to Partnerships

Banks offer traditional term loans, in which you borrow a set amount of money and pay it back with interest on a predetermined schedule. These loans typically come with competitive rates and terms, but they can also be difficult to qualify for. If you have strong credit and can afford to wait for financing, a bank loan can be a great option for a partnership loan.

2. SBA Loans to a Partnership

The U.S. Small Business Administration (SBA) doesn’t provide business loans, but partially guarantees loans that banks and other lenders make to small businesses. By partially guaranteeing the loan, they eliminate some of the risk to the lender. As a result, SBA loans typically offer high loan amounts, low interest rates, and long repayment terms. However, they have fairly stringent requirements to qualify.

The standard SBA 7(a) loan can be a good option for partnerships that need working capital or want to expand or acquire a business. The SBA 504/CDC loan can be ideal for a partnership that wants to finance the purchase of equipment or real estate or make upgrades to existing property.

Recommended: SBA Loan Calculator

3. Business Lines of Credit

A business line of credit is similar to a credit card, but the difference is that the line of credit can be much higher if you have a strong financial profile. Business lines of credit can be a great option if your partnership needs working capital but doesn’t have a set amount that it needs to borrow. With this option, you only pay interest on what you actually borrow.

4. Cash Advances

Also called a merchant cash advance (or MCA), a cash advance isn’t technically a loan, but a sale of future revenue in return for cash today. With an MCA, you sell your future revenue at a discount to a merchant cash advance company. To collect their money, the advance provider will usually deduct a percentage of your daily credit and debit card sales.

The benefit of this type of partnership financing is that when business is slow, you pay back less, and when business is booming, you pay back more. The downside, however, is that an MCA can be one of the most expensive types of business financing on the market.

Why Business Partnerships Might Need Loans

Here are some common reasons why a business partnership might benefit from outside funding.

To Boost Cash Flow

Cash flow can be a constant challenge for any small business. Without sufficient working capital, your partnership may struggle to manage day-to-day business operations, pay your employees, or cover emergency expenses. A short-term business loan can help you keep funds flowing through your business, even when profits dip.

To Fund a Marketing Campaign

Marketing is often key to a business’s success. But common methods — like advertising, social media marketing, public relations, and search engine optimization — cost money, which you might not have sitting around. A partnership business loan can help you start or expand your marketing efforts. This can lead to more customers and, in turn, more profits.

To Hire More Staff

You and your partners may like keeping things lean. However, if your small team is doing it all — from bookkeeping to sales to customer service — things could start falling through the cracks, impairing your business. Financing can allow you to bring on more employees, freeing you and your partners up to focus more on the big picture — growing your company.

To Buy Equipment or Inventory

A business loan can help your partnership buy important pieces of equipment you might be lacking, or replace equipment that has become outdated or inefficient. With equipment financing, you can often use the equipment you’re buying as collateral, which means you don’t have to put any of your partnership’s assets on the line.

If your partnership business sells products, there may be times when you want to place a bulk order, say before your busy season or if you find a discounted price. A short-term business loan can help you cover the cost of keeping your warehouse fully stocked.

To Expand into a New Market

Business partnerships may seek loans to support expansion into new markets, which often requires upfront investment before new revenue materializes. Loan funds can help cover costs such as leasing or purchasing new locations, marketing to a new customer base, hiring staff, or adapting products and services to local demand.

Recommended: Business Cash Management, Explained

Types of Partnerships

Choosing a business structure is an important decision in the early days of a new business. While any business that is operated by two or more owners falls under the partnership category, there are several different types of partnerships, and each set-up has its pros and cons. Here’s a look at the different types of partnerships.

General Partnerships

A general partnership is the simplest type of partnership and the easiest to set up. In fact, it’s the default business structure when more than one person starts a business and does not formally file documents with the secretary of state.

In a general partnership, all of the owners share equal rights and responsibilities, and each partner has full responsibility for all of the business’s debts. There are no legal state filing requirements for general partnerships, which means the business doesn’t have to pay ongoing state fees.

Benefits of a general partnership: It’s quick and easy to establish and set up, and ongoing costs are lower than other types of partnerships.

Drawbacks of a general partnership: Because general partnerships are very similar to sole proprietorships, any personal assets each member possesses can be used to settle debts and legal disputes. Should you be sued or default on a loan and your business is unable to settle the issue, your personal assets may be at risk.

Limited Partnerships

In a limited partnership, limited partners are able to enjoy a separation between their business and personal assets. Should the business become unable to pay its debts, a limited partner won’t lose any personal assets, such as their house or car. Limited partners also do not play a role in day-to-day management operations, though they still benefit from business profits.

At least one of the business owners in a limited partnership, however, must accept general partnership status. While the general partner is able to enjoy sole control over the management and daily operations of the business, that person’s personal assets would be vulnerable to the business’s debts and obligations.

Benefits of a limited partnership: Limited partners don’t have to worry about their personal assets ever being at risk, and the general partner can enjoy complete control over the company.

Drawbacks of a limited partnership: The general partner is at risk of losing their personal assets in the event of a legal dispute or loan default. In addition, limited partners have no say in the management of the business.

Limited Liability Partnership

A limited liability partnership offers personal liability protection for all of the partners involved. This can be an ideal type of partnership for lawyers, doctors, dentists, and other professional businesses because it protects each partner from the debts, mistakes, or malpractices of another individual in the partnership.

Benefits of a limited liability partnership: All business owners are protected from any kind of legal disputes or debts incurred by their peers. This type of partnership also offers the flexibility to bring more partners in, as well as let partners out.

Drawbacks of a limited liability partnership: Any partners involved in wrongful or negligent acts are still personally liable. In addition, it can be difficult to navigate any business changes since no one person is in charge. Businesses often circumvent this by assigning roles to each partner and signing a partnership agreement.

Recommended: What Are the Tax Benefits of a Limited Liability Company (LLC)?

Joint Ventures Treated as Partnerships

Joint ventures are often treated as partnerships when two or more businesses come together to pursue a specific project or opportunity while remaining separate entities. In these arrangements, partners typically share resources, risks, profits, and decision-making responsibilities based on the terms of their agreement.

Because joint ventures are usually formed for a limited purpose or time frame, financing needs — such as funding a new product launch or entering a new market — are often project-specific, and lenders may evaluate both partners’ financial strength when considering loan options.

Benefits of a joint venture: Partners can share resources, expertise, and financial risk, making it easier to pursue large or complex initiatives without bearing the full burden alone. This structure also allows for flexible management arrangements and profit-sharing terms tailored to the venture’s goals.

Drawbacks of a joint venture: Joint ventures require clear agreements to avoid conflicts, as partners may have different priorities or management styles. Additionally, each partner may be jointly liable for the venture’s obligations, which can increase financial risk if the venture underperforms or encounters legal issues.

Pros and Cons of Partnerships

Financial Flexibility vs. Shared Liability

Business partnerships can offer greater financial flexibility by allowing partners to pool capital, share borrowing capacity, and access funding options that might be unavailable to a sole owner. Combining resources can make it easier to invest in growth opportunities, manage cash flow, and absorb financial setbacks.

However, this flexibility comes with shared liability, meaning each partner may be financially responsible for the partnership’s debts and obligations. If one partner mismanages funds or defaults on commitments, the others may be held accountable, making clear agreements and strong communication essential.

Partnership Shareholder Loans

A shareholder is an investor in a corporation, and a shareholder loan refers to a loan provided to a corporation by one or more of its shareholders.

When a partner lends money to a partnership business, on the other hand, that loan is called a partner loan. It’s not a shareholder loan because partners don’t own shares in a partnership; they own interests or a percentage stake. Only loans made by shareholders can be called shareholder loans. However, the terms — and the results — of shareholder loans vs. partnership loans are similar.

Bona Fide Debt

For a shareholder or partnership loan to be considered a bona fide debt, it needs to be treated as a loan from a third party with a written promissory note or loan agreement. It also needs to have a fixed payment date and stated interest rate. With this arrangement, the business can typically deduct interest it pays the lending partner (or shareholder) just as if the loan were between two unrelated parties. In addition, the lending partner or shareholder will typically need to report that interest as income.

The Takeaway

If your partnership firm is looking for capital, there are all kinds of small business financing options to consider. To make sure you’re getting the best rates and terms for your business, it can be a good idea to shop around and compare the various small business loan options.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

Can a partnership get a business loan?

Yes, a partnership can get a business loan. Lenders typically evaluate the partnership’s financials, business plan, and each partner’s creditworthiness. Partners may be required to provide personal guarantees, meaning they share responsibility for repaying the loan if the business cannot.

Can a partnership lend money to a partner?

Yes, a partnership can lend money to a partner if the partnership agreement allows it. The loan should be documented with clear terms, including interest, repayment schedule, and purpose, to avoid tax or legal issues and ensure the transaction is treated as a legitimate loan rather than a distribution.

Are loans from partnerships treated differently from other business loans?

Yes, loans from partnerships can be treated differently depending on their structure and documentation. Loans made by a partnership to a partner must be clearly documented, carry reasonable interest, and follow IRS rules to avoid being reclassified as distributions or income, which could create tax and legal complications.

Can a partnership take a loan from partners?

A partner can typically borrow from the partnership, as long as all the partners agree to the loan. The partnership should draw up a promissory note that details all the terms of the loan and have it signed by the borrowing partner.

What are the risks of taking a business loan as a partnership?

Taking a business loan as a partnership carries risks such as shared liability among partners, meaning each partner may be personally responsible for repayment. Disagreements over debt obligations, uneven credit impact, and cash flow strain can also arise if the business struggles to meet repayment terms.

Photo credit: iStock/nortonrsx

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOSMB-Q425-047

If you’re thinking about launching a small business in the Peach State, you may want to structure it as a limited liability company, or LLC. In that case, you’ll first have to manage the formation process. Here’s how to form an LLC in the state of Georgia.

1) Choose a Name for Your Georgia LLC

As you set about forming an LLC in Georgia, start by picking your business name. The Georgia Secretary of State’s website sets out the state’s standards for name availability.

The first rule is that your new company’s name must be distinguishable from the names of other businesses already registered with the state. Georgia’s standards on this point align with those of nearly 40 other U.S. states. If your desired name differs from another business name only slightly — due to punctuation, plurals, suffixes, and the like — that’s not enough to be distinguishable.

In addition, the use of certain words in your LLC’s name may be restricted. Many words related to insurance, banking, and education are off-limits if you don’t have written approval from the relevant state agencies.

Check Name Availability with the Georgia Secretary of State

Once you decide on your ideal LLC name, use Georgia’s online business search to make sure it isn’t already registered. You can then reserve your business name for up to 30 days through the secretary of state while you finish your LLC formation. The nonrefundable filing fee is $35.

Recommended: How to Incorporate

2) Appoint a Registered Agent

An important component of creating an LLC in Georgia is appointing a registered agent. A registered agent must be located at a street address in the state, as it’s responsible for receiving official communications on behalf of your business. In Georgia, this role can be held by an owner or shareholder of the LLC or by a third party.

A domestic LLC’s registered agent in Georgia may be any of the following:

•   An individual resident of the state

•   A domestic corporation or LLC

•   A foreign corporation or LLC that is authorized to do business in Georgia

Common third-party options include using an attorney or a professional corporate service company. These professionals will know all the details of how to set up an LLC in Georgia. If you want to change your registered agent later, you can do so either when filing your annual registration or by filing an amended annual registration with the state.

Recommended: Types of Business Entities

3) File Articles of Organization

One difference between operating a sole proprietorship vs. an LLC in Georgia is that an LLC requires you to file articles of organization. The basic information you need to complete this online form includes:

•   Your LLC name or name reservation number

•   The name and address of the individual filing for the LLC

•   A valid email address

•   Mailing address of the principal office

•   The registered agent’s name and address

•   The name and address of your LLC’s organizer — that is, one or more individuals or companies signing and filing the articles of organization

•   Any optional provisions to your articles of organization — whatever additional information you need to include that’s not required by law

There’s also a registration fee you’ll need to pay via credit card, check, cashier’s check, or money order. Filing online costs $100; mailing in paper forms or applying in person costs $110.

If you file online, the standard processing time for LLC applications is seven business days. However, two expedited options are available: You can get your application processed in two days for an extra $100 or on the same business day (if your application is submitted before noon on a weekday) for an extra $250.

At this stage you may decide to loan money to your LLC to cover the costs of hiring a registered agent and filing (or refiling) your articles of organization.

Recommended: What Are Articles of Organization?

4) Create an Operating Agreement

You need not file an operating agreement in the state of Georgia, but it’s a good idea to draw one up to guide decision-making processes and other administrative responsibilities, especially if your LLC has multiple owners or shareholders. An operating agreement should create clear guidelines for running the company and managing the finances — servicing any startup loans, for example — in order to prevent potential conflict in the future.

Consider hiring a lawyer to help you create the operating agreement, because once it’s signed by the LLC’s members, it’s considered a binding contract. Here are common components of an LLC operating agreement:

•   Ownership percentages

•   Voting rights

•   Powers and duties of each member

•   Profit and loss distributions

•   Buyout and sale rules in case a member dies or wants to exit

You can see how important this document is in clarifying how members are paid, how future ownership changes can happen, and how debt decisions are handled. If your company applies for small business loans in the future, potential lenders may want to know these details.

For that matter, even if you’re a single-member LLC, an operating agreement can be useful. It establishes that the business’s operations are separate from your personal affairs. Having this spelled out could be important if you ever apply for an LLC business loan.

Recommended: Equipment Financing

5) Obtain Necessary Licenses and Permits

The state of Georgia does not require general business licenses or permits. The city of Atlanta does, however, as do other cities and municipalities.

Occupational licenses from the state may be mandatory for LLCs operating in certain industries. Georgia has separate licensing boards for these lines of work:

•   Animal care

•   Athletics and entertainment

•   Auctioneering

•   Cosmetology and barbering

•   Building and contracting

•   Counseling and assistance

•   Environmental

•   Funeral homes and cemeteries

•   Transportation and security

•   Wellness, including nursing and optometry

•   Various types of therapies, including athletic training

There is also a separate licensing process for any businesses related to selling alcohol, tobacco, or motor fuel. Complete information is available from the Georgia Department of Revenue’s licensing division.

Depending on your business, you may need to renew your occupational licenses in Georgia each year to continue operating your LLC in compliance with the law. You can log into your Georgia business registration account to find out the requirements for your own company.

Securing the proper licenses and keeping them current is essential to get your business started. If you later need a business line of credit to keep your LLC growing, lenders may want to see that your company’s licenses are in order to ensure it can continue to generate revenue.

6) Review Georgia Tax Requirements

In addition to learning from the secretary of state’s website how to set up an LLC in Georgia, you also need to register with the state’s department of revenue to take advantage of any applicable LLC tax benefits.

To begin, you must get a federal employment identification number (EIN) from the IRS. With an EIN, you can create an online account with the Georgia Tax Center (the online portal of the state’s Department of Revenue) using the following details about your business:

•  Business structure

•  Legal name of your LLC

•  North American Industry Classification System (NAICS) code

•  Date of first Georgia sales

•  Information about the LLC’s officers and responsible parties

•  Business mailing address

After you submit your form, you’ll get a state taxpayer identification number; you’ll then be able to log in and pay your business taxes either monthly or quarterly.

7) File Annual Registration with the Georgia Secretary of State

Once you’ve successfully set up your LLC in Georgia, you’ll be required to file an annual registration every year it continues to exist. If you fail to do so, your LLC may be considered administratively dissolved.

You can file your annual registration with the Georgia Secretary of State between January 1 and April 1 of each year. If you have no changes to make to your registration and you are current on your fees, all you will need is the name or control number of your organization and an appropriate form of payment (credit card for online filing; check, certified bank check, or money order when filing by mail or in person). You may even be able to register with the state’s One Click online system.

If you do need to change any of your LLC’s information, you’ll need to provide some additional facts, including the name of the person filing the annual registration and a valid email address, the name and address of the registered agent, and the mailing address of the LLC’s principal office.

The total filing fee is $60, whether you file online or by mail. You may be able to register for several years at once, but that won’t save you any money on fees.

The Takeaway

Georgia provides plenty of online resources to make the LLC formation process as straightforward as possible. There’s no state requirement for a general business license, but you may need certain professional or occupational licenses. To manage your company’s tax payments, you can easily set up an account with the state’s revenue department online.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

What steps are involved in forming an LLC in Georgia?

There are seven steps to get an LLC in Georgia. Before filing any paperwork, you need to choose and register a business name and appoint a registered agent. Then you’ll need to file your articles of organization, create an operating agreement if you wish, obtain business licenses if any are required for your industry, and register with Georgia’s Department of Revenue initially, and then every calendar year.

How much does it cost to file LLC formation documents in Georgia?

The cost to file LLC formation documents in Georgia varies depending on your filing method. The cheapest option is to file online, which costs $100. Filing paper forms by mail costs $110. You can also expedite the approval process to get an LLC in Georgia for an additional fee.

Do I need a Georgia business license to operate an LLC?

Whether or not you need a Georgia business license to operate an LLC depends on your industry. LLCs must be registered with the state, but only certain industries require specific business licenses in order to operate. Start by checking out Georgia’s online list of licensing boards to determine if any apply to your LLC. If you have additional questions, consider consulting a lawyer.

What is the role of a registered agent in forming an LLC in Georgia?

A registered agent is required for any LLC doing business in Georgia. This individual or business is responsible for receiving documents and official communication on behalf of your LLC. It can be an owner of the LLC or a third party; however, the registered agent must be located in Georgia.

How do I file an annual report for my LLC in Georgia?

LLCs are not required to file an annual report in Georgia, but you do need to file an annual registration. If there are no changes to your LLC, you can use the state’s One Click annual registration, or you can log into your account with the Georgia Secretary of State to make any changes.

Photo credit: iStock/gguy44

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOSMB-Q425-046

Let’s say you need some new financing for your small business. How do you choose between a business line of credit vs. a loan? This article explains the differences between the difference between two options and shows you how to figure out which one makes the most sense for your particular business needs.

What Is a Business Loan?

A small business loan is a common type of financing that gives your company a one-time injection of capital. In fact, in late 2024, 18% of nonemployer small businesses reported applying for a business loan within the past year to help finance their company.

Taking out a loan can be beneficial during any stage of business, whether you’re looking for a startup loan or implementing strategic growth plans for a mature company. After you receive the lump sum, you’ll repay principal and interest over a set term that usually lasts at least three years. Fixed interest rates are typical, meaning that the monthly payments will be consistent, making it easier to budget.

What Is a Business Line of Credit?

A business line of credit vs. a loan can provide funding as you need it, rather than as a one-time lump sum. During the initial draw period, this form of revolving credit lets you borrow up to your credit limit, while interest accrues only on your outstanding balance. Whenever you want to draw on your line of credit, you simply initiate a transfer from the financial institution that’s providing it, usually through online banking, a check from your business checking account, or a linked account.

You’ll typically have a minimum monthly payment based on your balance. As you repay that amount, your credit line is replenished so that you can borrow again in the future.

Eventually, your draw period will end and those minimum payments will convert to payments that cover principal and remaining interest over your repayment period. You may also be able to apply to renew your draw period.

Key Differences Between Business Loans and Lines of Credit

There are several major differences between a business line of credit vs. a business loan, including the following:

Pros and Cons of Business Loans

For entrepreneurs, there are both benefits and drawbacks to a business loan vs. a line of credit.

Pros:

•   Well-suited for large purchases

•   Flexible fund uses

•   Predictable repayment terms

Cons:

•   Funding times vary depending on lender

•   Must reapply for new financing

•   Eligibility criteria and documentation may be onerous

Pros and Cons of Business Lines of Credit

If you’re considering a business line of credit, you’ll want to review these advantages and drawbacks.

Pros:

•   Funds (up to the credit limit) are available when you need them

•   Flexible fund uses

•   Interest is due only on what you use

Cons:

•   Repayment amount is less predictable

•   Balance may need to be repaid more quickly than for a loan

•   May come with multiple fees

When to Consider a Business Loan

A business loan can be a strategic way to help your company in any number of situations. When you need a large lump sum for a specific purpose, it may be worthwhile to consider a loan.

For instance, if an injection of working capital could help your company grow by expanding its operations or purchasing a competitor, you might want to look at a loan. Or if you’re undergoing a short-term financial challenge, business loan funds might help cover your cash flow — assuming you can afford the payments.

Another common use for a small business loan is to consolidate or refinance higher-interest debt. This can be a good strategy if you can qualify for better financing terms that either save you money on interest or make your payments more affordable.

When to Consider a Business Line of Credit

There are several reasons you might want to contemplate a business line of credit vs. a business loan. One is to help cover cash flow gaps, especially for seasonal businesses or those that need to pay for inventory upfront. A line of credit can also help with day-to-day operating expenses, such as payroll and rent, especially for companies with tight margins.

Alternatively, while you wouldn’t want to take out a business loan on spec, a business line of credit can serve as an emergency fund. You can use the funds to cover unexpected expenses and repairs — or to take advantage of time-sensitive growth opportunities.

How to Qualify for Each Type of Financing

Different lenders may each have their own eligibility requirements for different types of business loans. That’s one reason that it’s generally useful to shop around for funding to find the best option available to you.

But in general, both line of credit and business loan qualifications can include the following:

•   Business and personal credit scores

•   Revenue

•   Time in business

•   Debt-to-income ratio

•   Business plan

•   Collateral

•   Industry

•   Financial statements

•   Loan amount and purpose

Alternatives to Loans and Lines of Credit

It may be worth considering all of your financing options before choosing between a line of credit vs. a business loan.

•   Equipment financing: An equipment loan is a form of secured financing that lets you purchase hard assets for your company. The equipment serves as collateral, which could help keep your interest rates lower.

•   Business credit cards: A small business credit card can help cover business expenses while also potentially earning rewards. It can also be an easy way to start building your business credit score.

•   Small Business Administration (SBA) loans: SBA loans are backed by the federal government and provide diverse financing options, from microloans to multi-million-dollar loans.

•   Crowdfunding: If you don’t qualify for traditional business financing, you could try crowdfunding to raise capital. You can offer either business-related rewards or equity to your backers, or you might simply accept donations.

•   Invoice financing: With invoice financing, the lender pays a portion of your invoices before your clients have paid the bills. Then you pay a fee out of the balance once the invoices have been paid in full.

•   Merchant cash advance: A merchant cash advance is another way to get paid ahead of time. You get money from the lender upfront, then repay the borrowed amount from a percentage of your future sales.

How to Choose the Right Option for Your Business

Lots of financing options are available to business owners today. How do you know which is best for your company? There are several factors to consider.

First, assess what your company needs. If you’re looking to make a major investment that requires a lump sum of cash upfront, a loan may work better. If you’re interested in being able to cover payroll during a slow season or having funds in reserve for emergencies, a line of credit may serve you better.

Next, look at the eligibility requirements for a business line of credit vs. a loan. You may need to meet certain revenue and time in business qualifications. Knowing what’s needed can help steer you toward the options you’re more likely to qualify for.

Finally, consider the costs of each financing structure, including the interest rate and any accompanying expenses, like origination or account maintenance fees. A business loan calculator can help you estimate the total cost of different loan terms.

The Takeaway

When you’re choosing between a business line of credit vs. a loan, your ultimate decision should depend on your company’s specific needs. Once you’ve determined what exactly you’re looking for, one of the best ways to figure out the option that will work for you is to compare multiple financing offers.

If you’re seeking financing for your business, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your business in minutes.

FAQ

What’s the main difference between a business loan and a business line of credit?

A main difference when you’re looking at a business loan vs. a line of credit is that a business loan provides you with a single lump sum, while a business line of credit gives you access to a credit line to draw from when you need it.

Is a business loan or a line of credit easier to qualify for?

It can be easier for a business to qualify for a line of credit versus a loan, especially when it comes to revenue and time in business requirements.

Can I have both a business loan and a business line of credit?

Yes, it’s possible to qualify for both a business loan and line of credit at the same time. Lenders will review your company’s debt-to-income ratio as part of the application process. As long as they believe you can afford repayments on both, you may qualify for both.

How does interest work on a business line of credit?

Typically, interest is charged on the outstanding balance, not on your available credit limit. Rates are usually variable, and you’ll likely have to make only minimum payments during the draw period. Once you enter the repayment period, you’ll have larger payments as you repay both interest and principal.

Are business loans or lines of credit better for startups?

It depends on the startup’s financial needs. A business loan is better suited for a one-time purchase, while a line of credit can help cover ongoing costs.

Photo credit: iStock/Drs Producoes

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Qualifying for a personal loan when self-employed can present some challenges. Self-employed individuals may find it difficult to produce traditional documentation — such as W-2s or pay stubs — used to verify income. And their income may not be steady, as it is with 9-to-5 workers. But that doesn’t necessarily mean you’re out of luck if you’re seeking a quick infusion of cash. Here’s a look at some ways to get a personal loan when you’re self-employed.

How to Get a Personal Loan If You’re Self-Employed

A personal loan is a type of installment loan that can be used for nearly any personal expense, including home improvements, a vacation, or consolidating your credit card debt. If you’re considering making a big purchase, like buying an engagement ring, a personal loan can be an alternative to using a high-interest credit card when you don’t have the means to pay the balance off right away.

Personal loans are typically unsecured, meaning a lender won’t require collateral. However, they can also be secured, usually by the asset purchased with the loan. Unsecured loans are usually approved based on the financial standing and creditworthiness of the borrower.

In addition to looking at an applicant’s credit history, lenders will also typically consider a potential borrower’s income when deciding whether or not to approve a loan and, if so, what the rates and terms will be. Those who are self-employed may find it more difficult to show proof of income, especially if their income fluctuates from month to month and year to year.

Self-Employed Loan Requirements

Loan requirements for self-employed individuals will be similar to the typical loan requirements for any borrower as determined by the lender. In addition to evaluating factors like the applicant’s credit score, many lenders will require proof of income.

Typically, the requirements for personal loan approval include pay stubs and W-2s to verify income, which most self-employed people can’t provide. It is possible for self-employed individuals to show proof of income, but it may require a little more legwork, as you’ll learn below.

One point worth noting: In general, lenders are looking for borrowers who have income stability, and it can help if the borrower has been working in a single industry for at least two years. A shorter employment history as a freelancer could be seen as indicating that you are a borrowing risk.

Showing Proof of Income When Self-Employed

Those who are self-employed have a couple of options for showing a lender they have sufficient and reliable income. Here are a few options that self-employed individuals could provide as income documentation.

Tax statements: Self-employed individuals can use their tax returns from the prior two or three years to offer proof of income. These forms include your income earned and taxes paid for those tax years. Lenders often view tax documents as a reliable source of income proof because they are legal documents.

Bank statements: Bank statements could be used if there is a regular history of deposits that illustrate consistent income.

Profit and loss statement: If you own your own business, this document (called a P & L) provides an overview of your costs, expenses, and revenue.

Court-ordered agreements: These may include things like alimony or child support.

Keep in mind that each lender will likely have their own application requirements. Contact the individual lender if you have specific questions on the types of documentation they’ll accept.

Consider Having a Cosigner

In the event that you are still struggling to gain approval for a personal loan with your self-employed proof of income, one option is to consider adding a cosigner. A cosigner is someone who agrees to pay back the loan should you, the primary borrower, default on making payments.

A cosigner can be a close friend or family member, ideally one who has a strong credit history who will strengthen your loan application. Given that a cosigner’s responsibilities are significant, this is not an undertaking to enter into without considerable thought and trust.

Build Your Credit Score Before Applying

Before applying for a personal loan (or any loan, for that matter), it can be wise to check your credit score. If it’s not at least in the good range, you may want to wait to apply for your loan until you can positively impact your rating. In general, the higher your score, the lower the interest rate and more favorable the terms you’ll be offered.

Key ways to build your score include always making payments on time, keeping your credit usage low, having a good credit mix and long credit history, and not applying for too much credit in a short period of time.

Compare Lenders Who Work With Self-Employed Borrowers

As you look for a personal loan, you may want to do an online search for lenders who explicitly say they work with self-employed borrowers. These financial institutions are likely to have systems in place that tailor the process to those who don’t, say, have W-2s. This can make application and approval simpler.

Prepare a Strong Loan Application Package

In addition to gathering the necessary documentation for your application (as detailed above), also consider ways to strengthen your package for a loan as a self-employed person. These include making sure you keep your personal and business finances separate, so you can accurately reflect your financial situation. If you are going to have a cosigner on the loan, ask them to prepare their paperwork as well.

Understand and Avoid Predatory Lenders

As you hunt for a personal loan when self-employed, you may come across unscrupulous predatory lenders, which typically offer no-credit-check loans at exorbitant interest rates (into the triple digits) and with steep fees. Often, they state the interest rate in a way that doesn’t reveal just how high it is (say, they cite a weekly payment vs. the monthly payment most people are accustomed to). They may use high-pressure tactics, such as saying the offer is only good for a very limited time.

If you are struggling to get approved due to a low credit score or lack of steady income, these lenders may seem to offer you a solution. Beware: These predatory lenders can keep you trapped in a cycle of growing debt.

Recommended: Guarantor vs. Cosigner: What’s the Difference?

Why It’s Difficult for the Self-Employed to Get a Personal Loan

It can be more challenging for self-employed individuals to provide proof of income to lenders, which can make it more challenging for them to get approved for a personal loan. But it’s important to note that each loan application is unique, and employment status is just one consideration.

For example, a self-employed individual who has a stellar credit history and who has been self-employed for a few years may be in a better position to apply for a personal loan than someone who has just transitioned into managing their own business.

The Income Challenge

Proving consistent and stable income can be the biggest challenge when getting a personal loan as a self-employed individual. Because you may not be guaranteed the same payment each pay period, lenders may request specific documentation in order to verify the fact that you have enough cash coming in to make payments on the loan. Some lenders may request tax returns for several years in order to verify your income.

Consistency Matters

Consistency in income is another major hurdle when seeking a loan for the self-employed. It’s not uncommon for self-employed people to experience fluctuation in their income. While some slight fluctuation may be acceptable to a lender, for the most part they are looking for consistent payments getting deposited into your account, even better if there is an increasing trend over time.

Higher Scrutiny During the Underwriting Process

Self-employed borrowers will likely face a higher level of scrutiny during the underwriting process which precedes final loan approval. For instance, if you lack steady, predictable income, you may be asked for additional tax returns or banking documents. Or P&L sheets or letters from your accountant about your business income could be requested. This is because lenders typically view those who are self-employed as less creditworthy and more of a risk to default on a loan.

Personal Loan Alternatives When Self-Employed

Personal loans aren’t the only option for self-employed individuals looking to borrow money to pay for expenses. Personal loan alternatives to consider include a credit card, cash advance, or a home equity loan.

Credit Cards With 0% APR Promotions

Credit cards can have high-interest rates, but ones with a 0% APR promotion (aka a balance transfer card) could be a great tool to pay for an upcoming expense. Just be sure to pay off the credit card before the promotional period ends and interest starts accruing.

Recommended: Average Credit Card Interest Rates

Cash Advances

A cash advance is a short-term loan generally offered by your credit card which allows you to borrow cash against your existing line of credit. Cash advances can provide an avenue for you to get quick access to cash, but there may be additional fees and a higher interest rate than usual. Be sure to read all the terms and conditions outlined by your credit card company before borrowing a cash advance.

Home Equity Loans or HELOCs

If you are a homeowner, you may be able to tap into the equity you’ve built in your home using a home equity loan or home equity line of credit (HELOC). A home equity loan is an installment loan where the borrower receives a lump sum payment and repays it in regular payments with interest.

A HELOC, on the other hand, is a revolving line of credit that the borrower can draw from and, once it is repaid, continue drawing from during a specified period of time.

Business Loans

Small business loans can be used to pay for business expenses. Self-employed individuals may be able to qualify for loans backed by the U.S. Small Business Administration (SBA), as well as private small business loans offered by banks, credit unions, and online lenders.

It is important to keep your personal and business expenses separate as a self-employed person. If you are using the money for a personal expense, you’ll want to avoid borrowing a business loan. Also keep in mind that many lenders don’t allow you to use personal loans for business expenses.

Peer-to-Peer Lending

Peer-to-peer lending bypasses the usual financial institutions and allows companies and individuals to invest in others via loans. You may have heard of some of the popular platforms, such as Kiva, Upstart, and Lending Club. These may be more accommodating for self-employed borrowers who are finding it challenging to secure a loan.

Secured Personal Loan

While most personal loans are unsecured, meaning they are approved based on the applicant’s creditworthiness, some of them are secured, meaning they are backed by an asset, known as collateral. Since these secured loans involve collateral, they are considered less risky. If the borrower defaults, the lender knows they can seize an asset that can help them recoup what is owed. Typical examples of collateral for personal loans include real estate, vehicles, cash in a bank or investment account, and other items of value.

The Takeaway

The challenge for self-employed individuals applying for a personal loan will generally be providing proof of income. Alternatives to traditional proof of income documents include tax or bank statements. Fortunately, many lenders understand that a full-time job isn’t the only qualifier of financial stability and will also consider factors like your credit score, financial history, and whether you have a cosigner.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

Can you get any loans if you’re self-employed with no proof of income?

It is possible to get a loan if you are self-employed. However, with zero proof of income, it may be challenging to gain approval for a loan. To improve your odds of approval, you may consider adding collateral to the loan or applying with a cosigner.

Are there any loans for self-employed people with bad credit?

While a strong credit history can help strengthen a loan application, it’s not impossible to qualify for a loan with bad credit. If you can show a consistent and stable income history, that could help improve your application. You’ll likely pay a higher interest rate and enjoy less favorable terms than if your score were higher, however. Another option to qualify could be to add a cosigner.

Can self-employed freelance workers get personal loans?

Yes, self-employed freelance workers can qualify for a personal loan. Instead of providing W-2 documents to verify their income, they will need to provide alternatives such as tax documents or bank statements. Applicants who have been working in a specific industry as a freelancer for two years or more may be viewed more favorably by lenders.

What documents do self-employed borrowers need to apply for a loan?

To apply for a personal loan, a self-employed person should probably gather tax returns, bank statements, profit and loss statements, and any documentation of other income sources (such as alimony). If you are working with a cosigner, they will also need to gather their documentation.

How can self-employed people improve their chances of getting approved for a loan?

Ways that a self-employed person can improve their chances of personal loan approval include building your credit score, working with lenders who specialize in loans for the self-employed, and considering whether to add a cosigner.

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If you’re looking to start or grow a side hustle or small business, you might think a business loan is the right next step. A personal loan, however, is another popular financial product that you also might be able to use. For instance, by using it to free up some cash elsewhere in your budget, you could put more of your income toward funding your business.

Because there are potential benefits and disadvantages to both types of financing, it’s important to understand the differences. You’ll find that information here and be better equipped to decide whether a business loan vs. personal loan might work best for you.

What Is a Personal Loan?

A personal loan is a source of financing that a borrower typically can use for just about any legal personal purpose. That said, you typically cannot use the money from a personal loan directly for your business. You might instead use the lump sum to consolidate credit card debt, which could free up funds in your overall budget to put back into your business.

Typically, you’ll find unsecured personal loans, with the borrower agreeing to pay back the full amount, plus interest, in fixed monthly payments within a predetermined time frame.

Some lenders also offer secured personal loans, however,which means some form of collateral is involved. Also, some offer personal loans with variable interest rates.

How Personal Loans Work

When you apply for a personal loan, you can expect the lender to review your personal financial information — including your credit score, credit reports, and income — to determine your eligibility. In general, the better your credit, the better your chances of receiving a lower interest rate.

Personal loan amounts vary, but some lenders offer personal loans for as much as $100,000.

Although most personal loans have shorter repayment terms, the length of a loan can vary from a few months to several years. Typically, they last from 12 to 84 months.

What is a Business Loan?

A business loan is a type of financing used specifically to pay for business expenses. It could be used to purchase equipment or inventory, for example, or to fund a new project.

There are many kinds of small business loans available — with different rates and repayment terms — including Small Business Administration (SBA) loans, equipment loans, micro loans, and more. Rates, terms, and loan requirements also can vary significantly depending on the lender.

How Business Loans Work

Applying for a business loan tends to be more complicated than getting a personal loan. For one thing, you’ll likely have to submit more paperwork to back up your application, including your business’s financial statements and an up-to-date business plan. The lender also usually will want to review your personal and business credit scores. And you may have to be more specific about what the loan will be used for than you would with a personal loan.

If your business is brand new, lenders may be reluctant to give you a business loan. Some lenders might ask you to put up some type of collateral to qualify.

Differences Between Business and Personal Loans

There are several factors you’ll want to understand when considering the difference between a personal loan vs. a business loan, including the loan costs, how you plan to use the money, and how much you hope to borrow. Here’s a look at a few basic differences.

Cost Differences Between Business and Personal Loans

Whether you’re considering applying for a business loan or a personal loan, it’s important to be clear about how much it could cost you upfront and over the life of the loan.

Interest Rates

Interest rates for business loans can be lower than for the interest rates for personal loans, but the rates for both can vary depending on the type of loan, the lender you choose, and your qualifications as a borrower.

Fees

Fees also can affect the upfront and overall cost of both personal and business loans, so it’s a good idea to be clear on what you’re paying. Some of the more common fees for business loans and personal loans that you might see include origination, application, packaging, and underwriting fees, and late payment and prepayment penalties.

Some fees may be subtracted from the loan amount before the borrower receives the money. But fees also may be folded into a loan’s annual percentage rate (APR) instead, which can increase the monthly payment.

Down Payment

Business loans may be available for larger amounts than a personal loan. For a larger business loan — a substantial SBA loan or commercial real estate loan, for example — you could be required to come up with a down payment. This amount can add to your upfront cost. However, just as with a mortgage or car loan, a larger down payment can help you save money over the long term, because you’ll pay less in interest.

Whether you’ll need a down payment, and the amount required, may depend on your individual and business creditworthiness.

Different Uses for Business and Personal Loans

One of the biggest differences between business vs. personal loans is the way borrowers can use them.

•   A business loan can be used to finance direct business costs, such as paying for supplies, marketing, a new piece of equipment, business debt consolidation, or a business property. But it typically can’t be used for indirect business costs, which means a borrower can’t pay off personal debts with the money or buy personal property with it.

•   Some business loans have a very specific purpose, and the borrowed money must be used for that purpose. For example, if you get an equipment loan, you must buy equipment with it. Or, if you get a business car loan, you must buy a business car with the money.

•   With a personal loan, you have tremendous flexibility in how you use the loan, although that usually does not include business purposes. Rather, you can use a loan to pay off credit card debt, fund a home improvement, or pay an unexpected medical or car repair bill. Personal loans are typically smaller than business loans, and they generally come with a shorter repayment term. It can be helpful to have a clear intent for how the money will be spent and to keep separate records for business and personal expenses.

Differences When Applying for Business and Personal Loans

The criteria lenders look at can be very different when approving a small business loan vs. a personal loan. Here’s what you can expect during the application process.

Applying for a Personal Loan

When you apply for a personal loan, your personal creditworthiness usually plays a large role in the application and approval process.

•   Lenders typically will review a borrower’s credit scores, credit reports, and income when determining the interest rate, loan amount, and repayment term of a personal loan.

•   Generally, you can expect to be asked for a government-issued photo ID, your Social Security number, and/or some other proof of identity.

•   You also may be asked for proof of your current address. And the lender will want to verify your income.

Applying for a Business Loan

When you apply for a business loan, your personal finances still will be a factor, though other aspects of your application will be reviewed carefully.

•   The loan underwriters also will evaluate your business’s cash flow, how long you’ve been in business, your profitability, the exact purpose of the loan, trends in your industry, your business credit score, and more.

•   The lender may ask for a current profit-and-loss statement, a cash-flow statement, recent bank statements and tax returns for the business, your business license and a business plan, and any other current loan documents or lease agreements you might have.

•   You also will have to provide information about your collateral if you are applying for a secured loan.

Recommended: Understanding Credit Score Ranges

Structural Differences in Business and Personal Loans

Knowing the differences in how personal loans vs. business loans are structured could help you decide which is right for you and your business. A few factors that might affect your choice include:

Loan Amount

A business loan may be more difficult to apply for and get than a personal loan, especially if your business is a startup or only a few years old. But if you can qualify, you may be able to borrow more money with a business loan. While personal loan amounts typically top out at $50,000 to $100,000, some SBA loans can go as high as $5.5 million.

Loan Length

You’ll likely find personal and business loans with both short and long repayment terms. But generally, personal loans have shorter terms (typically one to seven years), while some business loan repayment periods can be up to 25 years.

Tax Advantages

If you have a business loan, deducting the interest you pay on the loan may be possible when filing income taxes if you meet specific criteria.

With a personal loan, it might get a little more complicated. If you use the borrowed money only for business costs, you may be able to deduct the interest you paid. But if you use the loan for both business and personal expenses, you would only be able to deduct the percentage of the interest that was used for qualifying business costs.

And you should be prepared to itemize deductions, documenting exactly how you spent the money. Your financial advisor or tax preparer can help you determine what’s appropriate.

Support

Along with the traditional banking services you might expect to get with any type of loan, a business loan also may come with operational support and online tools that can be useful for owners and entrepreneurs.

Risk

When you’re deciding between a personal vs. business loan, it’s also a good idea to think about what could happen if, at some point, the loan can’t be repaid.

•   If your business defaults and it’s a business loan, the impact to your personal credit would depend on how the loan is set up.

◦   If you’re listed as a sole proprietor or signed a personal guarantee, it’s possible you could be sued, your personal and/or business credit scores could take a hit, and your personal and business assets could be at risk.

◦   If your business is set up as a distinct legal entity, on the other hand, your personal credit score might not be affected — but your business credit score could suffer. And it could be more difficult for you to take out a business loan in the future.

Pros and Cons of Business Loans

There are advantages and disadvantages to keep in mind when deciding whether to apply for a business loan vs. personal loan.

•   A business loan can be more difficult to get than a personal loan, especially if the business is new or still struggling to become profitable.

•   If you qualify for a business loan, you may be able to borrow a larger amount of money and get a longer repayment term.

•   A business loan also can make it easier to separate your business and personal finances. {Personal loans typically can only be used for personal expenses, as the name indicates.)

•   There could be fewer personal consequences if the business defaults on the loan.

Recommended: Can You Refinance a Personal Loan?

Pros and Cons of Personal Loans

A personal loan vs. business loan can have advantages and disadvantages to consider.

•   Personal loans can offer borrowers more flexibility than business loans in terms of usage, though those uses must typically be for personal expenses, such as paying for a home renovation or a vacation.

•   They’re generally easier to qualify for and may have lower interest rates.

•   One major hurdle may be that you cannot use them for any business expense in most situations. You could use them to free up cash in your budget which you might then apply to a business purpose.

Is a Business or Personal Loan Right for You?

Considering the differences between a personal loan and a business loan can help you decide which is right for your needs. You may want to do some online research, compare rates and terms, and/or ask a financial professional or business mentor for advice before moving forward with this important decision. Here are some things to think about as you look for a loan that’s a good fit for your personal and professional goals.

A business loan may make sense if:

•   You’re seeking a lower interest rate and/or repayment term.

•   You want to keep personal and business expenditures separate.

•   You’ve been successfully running your business for a while.

•   You need more money than you can get with a personal loan.

•   You hope to build your business credit.

•   You want to limit your liability.

A personal loan may make sense if:

•   Your goal is to use the money for personal purposes, which might free up funds in your budget for business expenses.

•   You plan to use the money for both business and personal expenses.

•   You can find a personal loan with a lower interest rate than a comparable business loan, and the lender approves the loan for business expenses.

•   You want to get the money as quickly as possible.

•   You are seeking a shorter repayment term.

•   You don’t want to secure the loan with collateral.

•   You feel confident about your personal ability to repay the loan.

Recommended: Can I Pay Off a Personal Loan Early?

The Takeaway

If you’re seeking funding to start or grow your business, you may decide to apply for a business loan. Another approach: You might apply for a personal loan, which could be used for personal purposes, freeing up money in your budget that could go toward your business. Personal loans are typically easier to apply for and offer quicker access to funds, but often at a somewhat higher interest rate and shorter term vs. business loans. Also, business loans usually offer significantly higher loan amounts and the interest can be tax-deductible. It’s worthwhile to consider the tax and credit implications of each type of loan too, among other factors.

FAQ

Are business loans more expensive than personal loans?

Business loans typically have lower interest rates than personal loans. However, these two loans aren’t interchangeable: one is for business uses, the other for personal expenses.

Can I use a personal loan for business?

Most (but not necessarily all) personal loans can be used for just about any personal use. Check the fine print, and follow the lender’s guidelines.

Are startup loans personal loans?

There are a few different options for funding a startup, including SBA loans, family loans, or crowdfunding platforms. But if you have good credit and are confident you can make the monthly payments, taking out a personal loan could be an effective strategy for funding a startup, if the loan permits that usage.

Photo credit: iStock/MicroStockHub

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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