Using a Personal Loan to Start Your Business

Key takeaways

Personal loans can fund startup costs like inventory, equipment, and contractor fees without requiring a business plan or revenue history.
The main trade-offs are that interest is only deductible for the portion used on business expenses, and your personal credit is on the line if you cannot repay.
A personal loan may work better for brand-new businesses that cannot yet qualify for an SBA loan or business line of credit.

Starting a business often requires funding before you have revenue or business credit. A personal loan can bridge that gap by offering fast approval without the documentation burden of an SBA loan or traditional business loan. Because approval is based on your personal credit and income rather than business performance, it’s one of the few funding options available to a business that doesn’t exist yet on paper.

This guide covers how to use one, what lenders allow, and how it compares to SBA and business loans so you can decide if it’s the right fit.

Can you use a personal loan to start a business?

Yes, many lenders allow business use of personal loan funds, but not all do. Check your specific loan agreement or ask your lender directly before assuming your loan permits it.

Where business use is allowed, permitted uses typically include inventory, market research, and contractor payments, with repayment terms usually running three to five years. As you shop around for the best rates, confirm each lender’s policy on business use before you apply, not after.

How to use a personal loan to start your business

Here is a step-by-step approach to getting a personal loan for your startup.

Check your credit score. A good credit score is considered 670 and above.. A higher score generally gets you a better rate.
Estimate your startup costs. List every expense: inventory, equipment, contractor fees, licenses. Many small business budgets include a 10-20% contingency buffer.
Compare personal loan lenders. Look at APR, loan amounts, and repayment terms. Check whether each lender allows business use of funds.
Gather your documents. You will need proof of income, a government ID, and recent bank statements. Self-employed borrowers may need tax returns.
Apply for the loan. Most lenders or lending platforms, including Upstart, let you check your rate with a soft credit pull first. This does not affect your credit score.¹
Use the funds for business expenses. Keep records of how you spend the money. This matters for potential tax deductions.

Personal loan vs. business loan: which is right for you?

Business loans typically require formation documents, tax records, and financial statements. New businesses rarely have all of these yet. Personal loans generally have fewer requirements, including proof of income and a credit check.

Small business loans are designed to grow and benefit a business. At the same time, lenders want assurance that you will be able to repay the loan, so they would want to see that your business has consistent cash flow. This could be difficult if you’re in the beginning stages and have not generated any revenue yet.

Personal loans are typically unsecured, which means you don’t have to put your car or house up as collateral. Small business loans may be secured or unsecured, but lenders may require a personal guarantee even if the loan is unsecured. This would mean that you need to repay the loan personally, even if your business doesn’t generate revenue to pay back the loan.

Personal Loans vs. SBA Loans vs. Small Business Loans

Feature	Personal loan	Business loan	SBA loan
Typical loan amount	$1,000-$50,000	$5,000-$500,000+	Up to $5 million
Repayment term	3-5 years	1-10 years	Up to 25 years
Approval time	1-3 days	1-4 weeks	30+ days
Collateral required	Usually no	Sometimes	Often yes
Business plan required	No	Sometimes	Often
Interest tax deductible	Yes – if used for business purposes	Yes	Yes
Credit requirement	Personal credit	Business + personal credit	Strong personal + business credit

Advantages of using a personal loan to start a business

Personal loans offer three main advantages for new businesses: flexibility, easier qualification, and faster funding.

Flexibility: You can use the funds for almost any business expense — inventory, equipment, marketing, or contractor payments. You do not need to explain each purchase to your lender.

Easier qualification: Personal loans have fewer requirements than business loans, including a credit check and income verification. They do not require a business plan, revenue history, or years in operation. This makes them accessible for new businesses.
Faster funding: Many personal loan lenders fund in one to three business days. SBA loans typically take 30 days or more.

Working a day job while launching your business? Include that income on your application. Lenders evaluate your personal income, not your business’s revenue, so it counts toward approval even though it’s unrelated to what you’re funding.

Disadvantages of using a personal loan for your business

Personal loans come with five tradeoffs worth weighing before you apply: limited tax benefits, personal credit exposure, lower loan caps, shorter repayment terms, and collateral risk if secured.

Interest is deductible only for the business-use portion. Business loan interest is usually deductible because the loan is tied to the business by design. Personal loan interest is deductible too, but only for the amount you can show went to business expenses. Talk to your tax professional and your lender about how to document business use before you apply.
Your personal credit is at risk. If the business fails and you cannot repay, your personal credit score takes the hit. This can make future financing harder.
Loan amounts are limited. Personal loans typically cap at $75,000. If you need more, you may need an SBA loan or business line of credit.
Repayment terms are shorter. Personal loans usually run three to five years. SBA loans can stretch to 25 years, giving you more time to repay.
Collateral risk if secured. Some personal loans are secured. If you pledge an asset and default, you could lose it.

When should you use a personal loan for your small business?

A personal loan works better for brand-new businesses that can’t yet qualify for a traditional business loan, typically because they don’t have revenue history to show a lender.

A personal loan makes sense in specific situations. Here is when it is a good fit:

Your business has no revenue history yet
You cannot qualify for an SBA loan or business credit
You need funding in days, not weeks
Your startup costs fall under $75,000
You have a good personal credit score (670 or higher)

If your business is established and qualifies for a business loan, that route usually offers lower rates and tax-deductible interest.

Just make sure you speak to your lender about how you plan on using your personal loan and shop around for competitive rates. Remember to check your credit score so you can qualify for the best rates.

Can you use a personal loan to start a business if you’re self-employed?

Yes. Being self-employed does not automatically disqualify you. Lenders look at income and credit, not employment type.

Self-employed borrowers and 1099 workers may need to provide extra documentation. Lenders often ask for two years of tax returns, recent bank statements, and proof of ongoing contracts or clients. This helps them verify your income stability.

If your income is irregular, a higher credit score can offset the risk in a lender’s eyes. Lenders weigh your full financial picture, not just your pay stubs. You can check your rate through Upstart without affecting your credit score.¹

Can I use personal loans through Upstart for business purposes?

It depends on the lender you are matched with on Upstart platform. When you apply through Upstart, you are matched with a lender based on your credit profile. Whether you can use the funds for business purposes depends on that lender’s terms. Before you accept an offer, confirm with your specific lender that business use is allowed.

Frequently asked questions

Can you use a personal loan to start a business?

Yes. Personal loans can fund almost any startup cost, including inventory, equipment, contractor fees, and marketing. You do not need a business plan or revenue to qualify. Confirm your lender permits business use before applying.

Can I get a personal loan to start a business if I am self-employed?

Yes, self-employed borrowers can qualify. Lenders care about income stability and credit score, not whether you receive a W-2. You may need two years of tax returns and recent bank statements to verify your income.

Is personal loan interest tax deductible for a business?

Yes, for the portion used on business expenses. Personal loan interest follows the same rule as any loan: the IRS looks at how you used the funds, not the loan’s name. If you use the full loan for your business, you may be able to deduct all of the interest. Ask a tax professional to confirm how to document your business use.

What is the difference between a personal loan and an SBA loan for starting a business?

Personal loans are faster to obtain and may be easier to qualify for. No business plan, collateral, or revenue history required. SBA loans offer higher amounts, longer terms, and tax-deductible interest, but take 30 or more days and require extensive documentation.

How much can I borrow with a personal loan to start a business?

Most personal loans range from $1,000 to $50,000, though some lenders, including Upstart, go up to $75,000⁵. If your startup costs exceed your lender’s cap, you may need a business loan or SBA loan instead.

Can a personal loan help with irregular business income?

Yes. Because qualification is based on personal credit and income, not business revenue, you can access funding even before your business earns consistently.

Upstart Network, Inc. (NMLS #936133) is not a lender. All loans on its marketplace are made by regulated financial institutions.

All mortgage lending is conducted by Upstart Mortgage, LLC dba Upstart Home Lending. (NMLS #2443873). Equal Housing Opportunity.

Checking your rate won’t affect your credit score: When you check your rate, we check your credit report. This initial (soft) inquiry will not affect your credit score. If you accept your rate and proceed with your application, we do another (hard) credit inquiry that will impact your credit score. If you take out a loan, repayment information may be reported to the credit bureaus.
Upstart’s model considers education: Neither Upstart nor its lending partners have a minimum educational attainment requirement in order to be eligible for a loan.
41% more approvals and 33% lower rates than a traditional model: As of publication in April 2026, and based on a comparison between the Upstart model and a hypothetical traditional model using Upstart data from Jan – Dec 2025. For more information on the methodology behind this study, please see Upstart’s Annual Access to Credit results here.
Unsecured Loans: While most loans through Upstart are unsecured, certain lenders may place a lien on other accounts you hold with the same institution. There may be an option to secure your personal loan through Upstart with your vehicle, which will require a lien to be placed on the vehicle. It is important to review your promissory note for these details before accepting your loan.
Loan amounts from $1,000 -$75,000: Your loan amount will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will qualify for the full amount. Minimum loan amounts vary by state: GA ($3,100), HI ($1,500), MA ($7,000). Maximum loan amounts may vary by state.
Closing and funding timeline: In April 2026, 10% of funded HELOCs achieved a closing timeline of 2 days or less and a funding timeline of 7 days or less. This timeline assumes consumers close with our remote online notary, provide supporting documentation promptly, and ensure the information provided is accurate and consistent with our verification process. Delays, discrepancies, and other unforeseen factors may impact the closing timeline. MBA’s 2025 Home Lending Study reports an average industry closing time of 37 days.
APRs from 6.2% – 35.99%, with 3 or 5 year terms: The full range of available rates varies by state. The lowest rates are only available to the most qualified applicants. A representative example of payment terms for an unsecured Personal Loan is as follows: a borrower receives a loan of $10,000 for a term of 60 months, with an interest rate of 17.50% and a 7.25% origination fee of $725, for an APR of 21.23%. In this example, the borrower will receive $9275 and will make 60 monthly payments of $252. APR is calculated based on 5-year rates offered in March 2026. There is no downpayment and no prepayment penalty. Your APR will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will be approved.
Instant deposits: To receive instant funding, your bank account must support instant transfers. If your account does not support instant transfers, funds will be available to you depending on your bank’s transaction processing time and policies.
Always On Commitment: We are committed to maintaining your credit limit as long as you continue to meet program eligibility and account requirements. To ensure the safety and security of all our members, we reserve the right to adjust or close lines in specific circumstances, including account default or late payments, suspected fraud, violation of our terms of service (including abusive behavior), or when necessitated by legal or regulatory requirements.
Cash Line draws: You may request a draw at any time. Only one draw may be outstanding at a time; after it is fully repaid, you may request another.
HELOC APRs as low as 6.52%: Terms shown here are subject to change without notice. APRs for initial advances range from 6.52% to 18.00% based on rates offered as of April 2026. The lowest rate is only available to consumers willing to become a member of a credit union and to those who meet a minimum FICO score of 780, CLTV under 70%, and DTI under 45%. Your actual rate will depend on many factors such as your credit history, combined loan-to-value ratio (CLTV), line amount, loan term, lien position, and property state. Origination fee to open an account is between 0% and 4.99% of the approved credit limit. The Annual Percentage Rate (“APR”) is variable and based on the Prime Rate as published in the Wall Street Journal “Money Rates” table plus or minus a margin. Your APR will never be less than 3.99% or greater than 18.00%. Property insurance is required.
No annual fee, prepayment penalty, or fees to redraw: Terms shown here are subject to change without notice. Origination fee to open an account is between 0% and 4.99% of the approved credit limit. The Annual Percentage Rate (“APR”) is variable and based on the Prime Rate as published in the Wall Street Journal “Money Rates” table plus or minus a margin. Your APR will never be less than 3.99% or greater than 18.00%. Property insurance is required.
2,500+ Variables:As of 3/31/2026. “Variables,” often also referred to as “features,” refers to raw variables and combined variables considered in our AI models. A “raw” variable is a non-combined, conceptually distinct unit of data, such as “applicant-reported savings.” A “combined” variable is data that has been transformed, combined, or otherwise engineered from a raw variable or set of raw variables, such as “applicant-reported savings” divided by “loan amount.
Fully automated loans: In Q2 2026. Percentage of Loans Fully Automated, which is defined as the total number of loans in a given period originated end-to-end (from initial rate request to final funding for personal loans and small dollar loans, and from initial rate request to signing of the loan agreement for auto loans) with no human involvement required by the Company divided by the Transaction Volume, Number of Loans in the same period.

How to Use a Personal Loan to Start Your Business