Find What Type of Small Business Loan Is Right For You
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What Can You Use a Business Personal Loan For?
A small business personal loan is flexible, meaning you can use it to cover just about any business-related expense, such as:
Inventory
If your business depends on inventory to operate, you can use a personal loan to purchase inventory. It can help you manage seasonal slow periods, replenish stock, or test new products.
Equipment
Chances are you need equipment to operate smoothly. With a small business personal loan, you may invest in computers, tractors, x-ray machines, or anything else.
Emergencies
An unexpected expense can strike your business at any moment. With a personal loan, you’ll have the funds to cover it.
Expansion costs
If you’re ready to grow your business, a personal loan may come in handy. The proceeds may help you open new locations or add new products or services.
Working capital
Working capital refers to the money your business uses to cover day-to-day expenses. A business personal loan might be useful if you need to pay for rent, utilities, and payroll, for example.
Marketing
Whether you’re a startup or more established business, marketing is essential. A business personal loan can help you pay for ads, signage, brochures, and other marketing initiatives.
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Frequently Asked Questions
Get answers to some of the most common questions we get asked.
The right small business loan depends on your unique business and goals. If you’re an established venture and want to lock in low rates and lengthy repayment terms, for example, an SBA loan should be on your radar. However, if you’re a startup looking for fast cash, a merchant cash advance might be a better fit, especially if your customers pay you with debit and credit cards.
There are many lenders who are willing to lend to small business owners with bad credit. They may look beyond your credit score and consider other factors like your time in business, cash flow, and annual revenue. Just keep in mind that you may have to settle for a higher interest rate.
With a personal loan, you get a set amount of money at once and repay it over a period of several months to several years. A credit card is more flexible because it lets you make purchases as much or as little as you’d like, up to a set credit limit. You’ll only pay interest on the amount you borrow
Small business personal loans are available through banks, credit unions, and online lenders. If you’re in search of an easy, quick application process as well as a fast approval and funding, online lenders are your best bet.
Each lender has their own unique eligibility requirements. Most of them, however, will consider factors like your credit score, time in business, annual revenue, debts, and cash flow. Some lenders will also look at your business plan so they can get an idea of what you plan to do with the funds.
Most small business loans charge fees in addition to business. Several examples of fees you might have to pay include origination fees, application fees, late payment fees, and returned check fees. Depending on the lender, you might also have to pay a prepayment fee if you pay your loan off early.
Yes, a small business personal loan may increase your credit score. As long as you make timely payments every month, you’ll slowly but surely notice a positive change in your credit. This is great news if you’re a new business and want to build your credit history or an established business who would like to improve it.
If you get denied for a small business loan, realize that you’re not alone as this happens to many people. You can always apply with a cosigner who has better credit than you or work to improve your credit and apply again later. Another option is to shop around and find a lender with more lenient requirements.
Funding times vary from lender to lender. Fortunately, online lenders have a reputation for fast funding. You can receive your money the same day you get approved and accept your loan offer, within 24 hours, or in a few business days. Funding will likely take longer if you pursue financing with a bank or credit union.
If you’re interested in a personal loan for your business, follow these steps.
1. Shop around: Do your research and explore the various personal loan options at your disposal. Compare interest rates, terms, fees, and perks so you can find the ideal solution. AmONE can simplify this process.
2. Gather documents: Most personal loan lenders will require certain documents when you apply for a personal loan. These may include a government-issued ID, like a driver’s license or passport, paystubs, bank statements, and tax forms. Make sure you have them on hand.
3. Fill out an application: Typically, you can apply for a personal loan online, from the comfort of your own home or office. Be prepared to share basic information about yourself and your finances. You’ll also need to submit some documents.
4. Wait for a decision: In most cases, personal loan lenders will get back to you shortly with a decision. Depending on the lender, this may be the same day you apply or within 24 hours.
5. Get Funded: Upon approval, you’ll likely receive your money via direct deposit. Once you do so, be sure to repay your loan according to your agreement.
Not all small business loans are created equal. Here’s an overview of some of the most popular options you may want to consider.
Personal loan
A personal loan offers a lump sum of money upfront. You repay it over time via fixed monthly payments. If you know exactly how much funding you need, it can be a good choice, especially if you can lock in low rates and favorable terms.
Pros
Affordable: Compared to credit cards, personal loans tend to have lower interest rates, making them a more cost-effective option.
Can improve your credit: If you repay your loan on time, it can help you increase your credit score.
Many options: There are many lenders who offer personal loans, so you should be able to find the right one for your particular budget and needs.
Cons
Fees: They usually come with fees in addition to interest, such as origination fees and application fees.
May damage your credit: Even if you miss one loan payment, your credit score will likely take a hit.
Collateral: Some personal loans must be backed by collateral or something valuable you own like a house or car.
Business credit card
A business credit card works like a personal credit card. You use it to pay for purchases as you need to, up to a set credit limit.
Pros
Rewards: Most business credit cards offer rewards like cash back and travel points.
0% APR intro periods: Some cards come with a 0% APR intro period, meaning you won’t pay interest on your purchases until it comes to an end.
Convenient: A business credit card makes it easy to pay for daily expenses as it eliminates the need for cash and checks.
Cons
May charge annual fees: Depending on the credit card you choose, you might be on the hook for an annual fee.
Can lead to debt: If you don’t pay off your credit card in full at the end of every month, you may fall into a cycle of debt.
Small Business Administration loan
Partially guaranteed by the U.S. Small Business Administration (SBA) and distributed by SBA-approved lenders, SBA loans offer up to $5 million in funding with repayment terms of up to 25 years.
Pros
Many types of loan programs: You can choose from a variety of SBA loans such as 7(a) loans, 504 loans, and microloans.
High borrowing amounts: If you need to borrow a lot of money, you may get approved for a higher loan amount than you would elsewhere.
Lengthy repayments: Most SBA loans come with long repayment terms so you can take your time paying them back.
Cons
Strict requirements: SBA loans can be difficult to get unless you have good credit, substantial revenue, and a few years of business under your belt.
Funding takes time: You might have to wait weeks or even months to receive your funds.
May have to make a down payment: Depending on the SBA loan you choose, expect to put anywhere between 10% to 20% down.
Merchant cash advance
With a merchant cash advance (MCA), you receive an upfront payment in exchange for a portion of your future card sales. In most cases, you’ll repay your advance through a percentage of your daily sales or daily or weekly withdrawals from your business bank account. An MCA might be a good option if you accept consistent debit and credit card payments from your customers.
Pros
Easy to get: If your customers pay you via cards, you should be able to qualify for an MCA, regardless of your credit.
Fast funding: You can receive the cash you need right away, often within 24 to 48 hours.
No collateral: With a MCA, you don’t have to put your house or car on the line.
Cons
May be expensive: Interest rates on MCAs are usually high and can increase your overall cost of borrowing.
Daily or weekly deductions: Since you’ll pay back your advance through daily or weekly withdrawals, you might face cash flow issues.
Might be limitations: Some MCAs have fine print stating borrowers can’t switch credit card processing companies or change their hours of operation.
