By Ben Luthi
Getting funding as a new business owner can be incredibly difficult. Unless you have strong revenues and a few years in business under your belt, you’ll have a hard time getting traditional business financing.
What’s left mostly includes expensive short-term loans. But one other option you might consider is a personal loan. If you’re thinking of starting a business, here’s how a personal loan might be able to help.
Can You Use a Personal Loan to Start a Business?
Personal loans are among the most versatile forms of credit available. While some lenders do restrict how you can use your funds—including for starting a business—there are others that don’t include business purposes on their exclusion list.
Lenders may state on their website whether they allow borrowers to use loan funds to start a business. If you can’t find that information, it’s best to carefully look through your loan agreement and be honest about your intentions on any forms you fill out.
If you’re still unsure, contact the lender to let them know what you plan to use the money for and ask if it’s allowable under their terms and conditions. The lender may prohibit borrowers from using their loans for business purposes and could require immediate debt repayment if it’s determined you did it anyway.
How Much Can You Get in a Personal Loan to Start Your Business?
Personal loan amounts can vary depending on a few different factors, including by lender. Depending on where you look, you may be able to get as little as a few hundred dollars up to $100,000.
That doesn’t necessarily mean you can borrow up to the maximum amount, though. Lenders will review your credit history, income and other debts to determine how much they’re willing to lend to you. For example, if you have a relatively low credit score or a high debt-to-income ratio, you may be limited on how much you can borrow.
Fortunately, if you’re working with lenders that offer prequalification, you can usually find out what you qualify for during that risk-free process.