Insufficient funding can be a major roadblock to realizing the dream of business ownership, which is why many business owners take on debt to get up and running. A popular option among small business borrowers is to take out a personal business loan. Issued by banks, credit unions and online alternative lenders, personal business loans are unsecured loans that you pay back monthly over a fixed period. However, before you take out a personal loan for your business, make sure you understand the pros and cons of this type of financing, because it’s not a good fit for everyone.
“If you have a clear plan in terms of growth and understand the risks involved, it can make sense,” Nishank Khanna, chief financial officer of Clarify Capital, told business.com. “That being said, there’s a much higher risk with a personal business loan than taking a business loan.”
Can you use a personal loan for business?
Yes, you can take out a personal loan to fund your business. Often, small business owners pursue this option if they cannot obtain a small business loan. Small businesses are the heartbeat of the U.S. economy, but the success rate among them is low. According to the Small Business Administration, only half of businesses with employees make it past the five-year mark, and the coronavirus pandemic has only exacerbated that problem.