Business loans and personal loans serve two distinct purposes. A business loan is used to support business needs, which may include business debt consolidation, acquiring a new business, or boosting cash flow. A personal loan is used for consumer needs like home improvements or credit card debt consolidation. In a situation where you need to borrow money, you’ll want to consider the differences between business and personal loans to determine which is the most appropriate for you.

Key Considerations

Business loans help build your business credit history and offer larger loan amounts with potentially longer repayment terms
Personal loans are generally easier to qualify for, don’t require collateral.
If you're starting a new business venture, you may need to take out personal financing to launch your business, depending on your lender
Choosing between a business loan and a personal loan depends on how you intend to use the funds.

Pros and Cons of a Business Loan

There are several advantages and downsides to consider before you take out a business loan.

Pros

You can use a business loan to build your business’s credit history, which can open up future financing opportunities.
A business loan helps simplify your expenses, making it easy to distinguish between business and personal expenses at tax time.
You may qualify for a larger loan amount that will meet your company’s financial needs.
• In some states, you may be able to deduct loan interest from your business taxes.

Cons

You may need to make a personal guarantee to repay your business loan, meaning there may still be an impact on your personal financial situation.
You may not be eligible for a business loan if your company is new.

Pros and Cons of a Personal Loan

Before using a personal loan, there are benefits and downsides to consider.

Pros

You won’t need to provide collateral to secure a personal loan.
You may qualify for a personal loan with a good personal credit history and score.
You can use a personal loan for numerous reasons, including credit card debt consolidation, home improvements, and other personal expenses.

Cons

Loan amounts are smaller.
You won’t be able to use personal loan payments to build your business credit profile.
Interest rates may be higher than on a business loan.

The Key Differences Between a Business and a Personal Loan

There are several points where business and personal loans differ, as shown in the table below.

Business Loan

Personal Loan

Loan use:

Consolidate business debt, maintain daily operations with working capital, acquire a new business, purchase equipment, or other business-related expenses

Amount:

Up to $500K^1,2 with BHG Financial

Repayment terms:

May offer extended terms, up to 12 years¹ with BHG Financial

Documentation required:

Tax returns, bank statements, balance sheets, business plan

Collateral required:

May need to secure the loan with equipment or commercial property and some business loans may require a personal guarantee

Length of time to fund:

As few as 3 days⁴with BHG Financial

Personal Loan

Loan use:

Consolidate high-interest debt or fund major personal expenses like home improvements or a wedding

Amount:

Up to $200K¹ with BHG Financial

Repayment terms:

May offer terms up to 10 years^1,3 with
BHG Financial

Documentation required:

Proof of employment, income verificatio

Collateral required:

Most personal loans are unsecured, meaning you won’t need to put up any collateral

Length of time to fund:

As few as 5 days⁴ with BHG Financial

Can You Use a Personal Loan for Business?

Yes, certain lenders allow you to take out a personal loan to cover expenses for a brand-new business. However, BHG offers a unique financial solution designed specifically for entrepreneurs. Our startup loan is a business loan for non-business owners, allowing you to launch a new business or side hustle with all the advantages of commercial financing. For example, you could get a large loan up to $500K^1,2 with extended terms up to 12 years¹ to take advantage of affordable monthly payments. If you're planning to maintain your day job while you pursue entrepreneurship opportunities, our startup loan is right for you.

When Should You Get a Business Loan vs. a Personal Loan?

A business loan may be the better option if:

Your company is established and has a solid business credit score.
You want to use the loan to help build your business credit score.
You need to borrow a significant amount of money that a personal loan won’t support.
You want to secure a longer repayment term.
You don’t need the money right away.
You want to secure a lower interest rate.

A personal loan may make sense when:

Your business is new, and you’ve yet to establish a business credit score
You plan to use the money for personal expenses.
You don’t have collateral to secure the loan.
You need the money within a few days.

Explore Business and Personal Loan Options with BHG Financial

Whether you choose a business or personal loan, the U.S.-based concierge service team at BHG Financial is ready to support your needs.

Since 2001, we've provided financial solutions for the country's most successful professionals and small business owners. Offering business loans up to $500,000^1,2 with terms up to 12 years^1,5 as well as personal loans up to $200,000¹ with terms up to 10 years,^1,3 our financing can support all of your professional and personal goals.

See how affordable our loans can be by checking your estimate today.

FAQs: Business Loan vs Personal Loan

What does a bank look for before approving a business loan?

Banks evaluate credit history, financial statements, business plans, collateral, and the personal credit of the business owner(s). They also consider the industry and economic conditions. Strong financial health, clear plans for loan use, and sufficient collateral increase the chances of approval.

Do business loans have better interest rates?

Business loans can have better interest rates compared to personal loans, especially if the business has a strong credit history and financials. Business loans are often larger and secured with collateral, which can lead to lower rates. However, rates vary based on the lender, the type of loan, and the creditworthiness of the business and its owners. Personal loans, being unsecured and smaller, typically have higher interest rates.

¹Terms subject to credit approval upon completion of an application. Loan sizes, interest rates, and loan terms vary based on the applicant's credit profile. Finance amount may vary depending on the applicant's state of residence.

²BHG Financial business loans typically range from $20,000 to $250,000; however, well-qualified borrowers may be eligible for business loans up to $500,000.

³Personal Loan Repayment Example: A $59,755 personal loan with a 7-year term and an APR of 17.2% would require 84 monthly payments of $1,229.

⁴This is not a guaranteed offer of credit and is subject to credit approval.

⁵Business Loan Repayment Example: A $94,695 commercial loan with a 9-year term and an APR of 14.8% would require monthly payments of $1,591

Annual percentage rates (APRs) for BHG Financial business loans range from 10.70% to 71.64%, with terms from 1 to 12 years. 

Annual percentage rates (APRs) for BHG Financial personal loans range from 11.96% to 25.31%, with terms from 3 to 10 years.

Consumer loans funded by Pinnacle Bank, a Tennessee bank, or County Bank. Equal Housing Lenders.  

No application fees, commitment, or impact on personal credit to estimate your payment.

For California Residents: BHG Financial loans made or arranged pursuant to a California Financing Law license - Number 603G493.