Quick answer
Usually it's better not to. A personal loan is consumer credit designed for personal, domestic or household purposes, so using it for the business blurs your records, can breach the loan's purpose, and loads business risk onto your personal credit. A business-purpose loan — in the business's name or your ABN — keeps the debt, records and tax picture cleaner. We only arrange business-purpose finance.
Key points
- Personal loans are consumer credit, built for personal, domestic or household purposes.
- Using one for the business mixes your records and puts business risk on your personal file.
- A business-purpose loan is assessed on the business and keeps the paper trail clean.
- Whatever you choose, ask your accountant how the interest will be treated for tax.
- Personal loan
- Consumer credit, personal purposes
- Business loan
- Assessed on business purpose and trading
- What we arrange
- Business purposes only
- Enquiry
- No credit check to enquire
It’s one of the most searched questions from small business owners, and for good reason. A personal loan feels familiar. Your bank already knows you, the app is right there, and the approval might come quickly. When the business needs $15,000 for a van repair or new stock, it’s easy to think “I’ll just take out a personal loan and sort it later.”
Here’s the honest picture, from people who only arrange business finance — so, yes, we have a view, but we’ll show our working.
What is a personal loan actually designed for?
A personal loan is consumer credit. ASIC’s guidance describes consumer credit by its purpose: lending that is predominantly for “personal, domestic or household purposes”. Cars for the family, a wedding, a holiday, consolidating credit cards — that’s what personal loans are built and assessed for.
A business-purpose loan is assessed differently. The lender looks at the business’s trading, bank statements and purpose, and structures the loan around business cash flow.
What goes wrong when owners use a personal loan for the business?
Nothing dramatic, usually — just a slow build-up of small problems:
- The purpose doesn’t match. Many personal loan contracts ask what the money is for. Using it for something else can put you offside with the lender.
- Your records get tangled. Business money arrives in a personal account, gets transferred, and a year later nobody can easily trace it.
- Business risk lands on your personal file. If the business has a bad quarter, your personal loan still needs paying, and any missed payments show up as personal credit problems.
- The tax picture blurs. The ATO’s general rule is that an expense “must have been for your business” and, where there’s a mix, “you can only claim the portion that is used for your business”. Your accountant then has to untangle it.
- Future borrowing gets harder. A future business lender sees personal debt servicing business costs and has to work out what’s really going on.
How does a personal loan compare with a business-purpose loan?
| Personal loan | Business-purpose loan | |
|---|---|---|
| Designed for | Personal, domestic or household spending | Business purposes |
| Assessed on | Your personal income and expenses | Business trading, plus you as owner or guarantor |
| Borrower | You personally | The business (company/trust) or you under your ABN |
| Record-keeping | Business spending mixed into personal accounts | Clear paper trail inside the business |
| Security | Usually unsecured or a car | Unsecured, or property from $20,000 to $5,000,000 |
| Tax questions | Accountant must trace business use | Accountant starts from a cleaner position |
Our borrow personally or through the business tool runs this comparison for your specific structure, purpose and property position.
Is there ever a case for borrowing personally?
Honestly, sometimes. A very small, short-term need might be simpler to cover from your own savings. And a sole trader is legally the same person as the business anyway, so “personal” and “business” borrowing are closer than for a company. But even for sole traders, a loan taken out for a business purpose and run through a business account is easier to manage, easier to explain to your accountant, and easier for the next lender to understand.
What we’d caution against is using consumer credit — personal loans, personal credit cards, buy-now-pay-later — as the business’s regular funding source. That’s when the tangle starts. If you want to see how a business-purpose option would look instead, a 60-second enquiry is the quickest way to find out.
What should you do if you’ve already used a personal loan?
Don’t panic; it’s very common. A few steps help:
- Document it. Keep a note of the loan, what the money was spent on, and which business costs it paid.
- Tell your accountant. They can advise on how to treat it for tax.
- Stop adding to the tangle. Put future business costs through a business account.
- Consider a clean-up. Some owners refinance business-related personal debt into a business-purpose loan — see refinancing business debt off personal cards — and the page on mixing personal and business debt explains how lenders view it.
Illustrative example: A sole trader florist took a personal loan to buy a cool room, then paid it from her business account. Two years later she wants a business loan for a second shop. The lender sees a personal loan being serviced from business income and asks for an explanation. It’s all fine in the end — but a business-purpose loan from the start would have saved a week of back-and-forth.
What if you need money for personal reasons too?
Then keep the two needs separate. Business finance must be used for the business; we only arrange loans for business purposes. If part of what you need is personal, speak to a consumer lender about that part, and keep it well away from the business’s funding.
Start with the right kind of loan
If the money is for your business, it’s worth starting with a loan built for business. Telling us what you need takes about 60 seconds and there’s no credit check at that stage. Your details go to one specialist rather than being passed around a pile of lenders, and they’ll call you to understand the purpose and your structure. Please answer the form accurately — especially what the money is for — so we can match you properly from the start.
Frequently asked questions
Is it illegal to use a personal loan for business?
Not in itself, but personal loans are designed and assessed for personal purposes, and the lender's contract may state what the money can be used for. Using it otherwise can create problems with the lender and makes your records harder to follow. Read your contract and talk to your accountant.
Do you offer personal loans?
No. We only arrange finance for business purposes. If you need money for personal, domestic or household reasons, a business lender isn't the right place.
Is a personal loan cheaper than a business loan?
Not necessarily, and it depends entirely on your situation. Compare the total cost of finance, fees and terms of each option rather than just the headline. We don't publish rates because every business loan is priced on the individual circumstances.
Will a business loan still show on my personal credit file?
If you're a sole trader or a guarantor, a business loan may appear in your credit information. But it's recorded and assessed as business credit, which lenders read differently from consumer debt.
I already used a personal loan for my business. What now?
It's common. Keep good records of where the money went and talk to your accountant. Some owners later refinance business-related debt into a business-purpose loan — see our page on refinancing business debt off personal cards.