Do you need a business loan or a personal loan?

There is a range of financing options available for businesses. Find out if your business is more suited to a business loan or personal loan.

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There are many reasons why a company may choose to take out a loan. A sudden spike in sales might have created a need for some additional cash flow, or maybe that influx has created the need to expand. While a tailored business loan would seem to be the obvious choice, many smaller companies still side with a personal loan, believing in its security and simplicity. Here we consider the pros and cons of both.

Which is easier to set up, a business loan or a personal loan?

  • Business loan. Most banks want to see detailed projections, business plans and assurances that your company will be in a position to make repayments for the whole loan period. However, many online business lenders require fewer details to approve a business loan. You’ll find these lenders may approve you after simply seeing your business’s accounting information or financials as well as your own personal information.
  • Personal loan. The fate of your application for a personal loan will be predominantly decided by your credit position and your own personal financial situation. You’ll also need proof of income, and as you are self-employed you will likely need the last two years of tax returns.

Loan options you can apply with

Data indicated here is updated regularly
Name Product Min. Loan Amount Max. Loan Amount Loan Term Upfront Fee Filter Values
Prospa Business Loan
$5,000
300,000
3 months to 3 years
3% origination fee
Small business loans are available from $5,000 - $300,000 on terms of up to 3 years. At least six months trading history and a monthly turnover from $6,000 is necessary.
OnDeck Business Loans
$10,000
250,000
6 months to 2 years
3% of loan amount
Apply for up to $250,000 and receive your approved funds in one business day. Minimum annual turnover of $100,000 and 1 year of trading history required.
Max Funding Unsecured Business Loan
$2,000
300,000
1 month to 1 year
$0 application fee
An unsecured business loan from $2,000 that offers convenient pre-approval and no early repayment fees.
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Data indicated here is updated regularly
$
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Monthly Service Fee Monthly Repayment
ING Personal Loan
8.99% (fixed)
9.13%
$5,000
2 to 5 years
$100
$0
You'll receive a fixed rate of 8.99% p.a.
Benefit from no ongoing fees, no early repayment fees and flexible loan terms on amounts up to $30,000.
CUA Unsecured Fixed Rate Personal Loan
9.89% (fixed)
10.14%
$5,000
1 to 7 years
$175
$0
You'll receive a fixed rate of 9.89% p.a.
An unsecured loan from $5,000 with flexible repayments and no monthly fee.
Wisr Personal Loan

From 7.95% (fixed)
8.78%
$5,000
3 to 5 years
$595 (Establishment Fee)
$0
You'll receive a variable rate between 7.95% p.a. and 19.45% p.a. based on your risk profile
A loan from $5,000 that charges no fees for extra or early repayments. Keep in mind security is required in some cases.
SocietyOne Unsecured Personal Loan

From 7.50% (fixed)
9.51%
$5,000
1 to 7 years
$300 (Based on $10,000)
$0
You'll receive a fixed rate between 7.50% p.a. and 20.49% p.a. based on your risk profile
A loan from $5,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.
SocietyOne Unsecured Personal Loan

From 7.50% (fixed)
9.51%
$10,000
2 to 5 years
from 3% of loan amount
$0
You'll receive a fixed rate between 7.50% p.a. and 20.49% p.a. based on your risk profile
A loan from $10,000 to use for a range of purposes. Benefit from no ongoing fees and no early repayment fee.
CUA Discount Variable Personal Loan (Loans over $30,000)
10.89% (variable)
11.15%
$30,000
1 to 7 years
$175
$0
You'll receive a discounted variable rate of 10.89% p.a.
Borrow over $30,000 and receive a discounted interest rate. No monthly fees and a redraw facility also available.
CUA Unsecured Variable Personal Loan
11.89% (variable)
12.15%
$5,000
1 to 7 years
$175
$0
You'll receive a variable rate of 11.89% p.a.
Borrow from $5,000 with the option for flexible repayments and no monthly fees.
MoneyPlace Unsecured Personal Loan

From 7.65% (fixed)
7.65%
$5,000
3 to 7 years
0% to 5.5% of loan amount, capped at $950
$0
You'll receive a fixed rate between 7.65% p.a. and 26.99% p.a. based on your risk profile
A no-frills personal loan that you can use for any purpose. Loan amounts available up to $50,000 and early repayments allowed.
Liberty Personal Loan

From 7.65% (fixed)
7.65%
$5,000
3 to 7 years
0% to 5.5% of loan amount, capped at $950
$0
You'll receive a fixed rate of 7.65% p.a. to 26.99% p.a. based on your risk profile
Apply for a credit limit from $5,000 to $50,000 on terms from 3 to 7 years and pay no ongoing fees or charges.
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Which offers better value for my business?

  • Business loan. For business taxes, there are significant benefits to keeping your personal and business affairs separate. As well as claiming goods and services tax, retail and manufacturing companies, in particular, can benefit from reduced import duties on products purchased using your loan.
  • Personal loan. Ensuring that you are not being overcharged for business expenses that are paid for with a personal loan can be difficult and time-consuming.

What if I have business partners?

If you opt for a business loan, the loan will be held in a joint account with easy access for all partners. With the loan guaranteed by each partner, the risk placed on each individual is greatly reduced. If you decide to apply for a personal loan, lack of joint access to your company’s loan may affect the efficiency of your company, or create issues of responsibility if the business is unable to meet repayments.

However, there is the option of taking out a joint application personal loan. These loans usually have a maximum of two applicants, although some allow up to four.

Do business loans or personal loans offer better flexibility?

Business loans

  • Lenders are likely to enforce strict limits in the first 12 months of your loan, but if you can back up your initial projections you could well be granted an increase in your funding amount.
  • You will need to use the entire loan amount for business purposes.

Personal loans

  • If you want to take out more funds later on, you will have to prove to the bank that your personal loan was in fact used, successfully, to fund a growing business. The administrative processes attached to this can be slow.
  • Funds can be used for business purposes as well as for other personal needs.

Should I opt for a secured or unsecured loan?

  • Business loan. Deciding between a secured or unsecured business loan will often depend largely on the amount of money required. Most banks require security for startup loans, or only offer unsecured line of credit loans. However, there are now a number of online lenders offering unsecured loans. Keep in mind that these unsecured loans can come with higher rates, so if you do you have security to offer you may want to compare what secured options you have available.
  • Personal loan. There are a variety of assets you can secure a personal loan to. However, if the business fails it will have a huge impact on your home and professional life should you default on the loan.

Is there anything else to consider?

Before you apply for a loan, there are a number of other factors worth thinking about.

  • Sole trader or partnership? There are clear reasons why a business loan would most likely be better suited to a company run by partners. However, a sole trader may appreciate the control they have over a personal loan, which will likely involve a smaller sum of money.
  • The length of the loan. For a shorter period, the lower rates of a personal loan might hold more appeal. However, over an extended period, for example, 10 years, this advantage might be overshadowed by the ease of use offered by a business loan.
  • The age of the company. One of the most common issues with a business loan is getting access to it in the first place. Startup companies will need to decide whether the difficulty of accessing the type of finance they’ve chosen will be worth it in the long-term.

Need additional cash flow?

If a sudden spike in sales has resulted in outstanding invoices, invoice financing could be an option to manage the cash flow. This type of business loan comes with reduced risk, no asset requirements or interest payments.

Data indicated here is updated regularly
Name Product Min. Loan Amount Max. Loan Amount Loan Term Upfront Fee Filter Values
Timelio Invoice Finance
$10,000
100,000,000
Up to 4 months
$0
Get up to 100% of the value of your invoices without having to wait for customer payments, and with no minimum turnover or operating history required.
Scottish Pacific Invoice Finance
$200,000
100,000,000
From 1 year
No set amount
Improve your business cash flow by financing your outstanding invoices. No minimum trading history required, but minimum 12 - month term and $200,000 in invoices.
Key Factors Selective Invoice Finance
$0
3,000,000
From 1 day
$0
Get access to funds in 4 hours. Pay as you use with no minimum, up to 80% advance on invoices, no lock-in contract and transparent fees.
Note: Must have annual sales turnover between $500,000 and $30 million.
BCashflow Positive Invoice Finance
$100,000
3,000,000
From 1 year
$0
Get funded up to 90% of the invoice in 4 hours. No hidden fees, 1.8% of the invoice for the first 30 days, and 0.06% per day after. Note: Suitable for businesses with monthly turnover between $100,000 and $3,000,000.
Scottish Pacific Selective Invoice Finance
$10,000
1,000,000
1 to 3 months
$500
Finance your unpaid invoices on demand with terms of 1 - 3 months. 95% of invoice is paid upfront, with no minimum trading history required.
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