Borrow personally, or through the business?

How to read the comparison

Almost every small business owner reaches a point where the business needs money and the quickest-looking option is personal: a personal loan from your everyday bank, a credit card already in your wallet, or a redraw on the home loan. The alternative is a loan taken by the business itself — the company, the trust, the partnership, or you under your ABN as a sole trader — for a clearly business purpose.

The tool compares those two routes across the six things that matter most to owners. It isn't trying to push you one way. For most business needs, borrowing through the business comes out cleaner, but the reasons differ depending on your structure, your property and how your money currently flows — and there are situations where options are narrow either way.

Structure

Who is actually the borrower? For a sole trader, the answer is always "you", because business.gov.au explains a sole trader has unlimited liability for the business. For companies and trusts, borrowing personally creates two debts: yours to the lender, and the entity's to you, usually recorded in a director's loan account.

Security

Personal borrowing is often either unsecured and limited by your personal income, or tied into your home loan. Business-purpose options can be unsecured and sized on turnover — typically $5,000 to $500,000 — or secured by property, from $20,000 to $5,000,000, as a separate business facility. See using home equity for business.

Guarantees

When a company or trust borrows, lenders usually ask directors for a personal guarantee. When you borrow personally, there's no separate guarantee — because you're already fully liable as the borrower.

Record-keeping

This is where the routes differ most in day-to-day life. Business costs funded from personal credit have to be traced and separated for your accountant, and mixed statements make the business harder for the next lender to read. Our money-mixing check shows how tangled things are today.

Risk to the family home

The home can be exposed directly (it's pledged as security) or indirectly (you're personally liable as a sole trader, partner or guarantor). Neither route removes risk entirely. What changes is how visible, documented and limited that risk is. Read protecting the family home before you decide.

What lenders look at

Personal lenders assess your personal income and expenses. Business lenders assess the business's bank statements, BAS and trading history, alongside your personal credit file once you choose to proceed. A clean business account is often the single biggest thing you can do to strengthen a business application.

Why we only arrange the business route

We're a business-finance service. We don't arrange personal loans, and we won't structure business finance for personal spending. That's not a technicality — keeping business borrowing in the business protects your records, your tax position and, often, your household. If part of what you need is genuinely personal, keep it separate and talk to a consumer lender about that part. More on this in should I use a personal loan for my business?

Questions about the tool

What does “borrow personally” mean in this tool?

It means taking out a loan or credit in your own name as an individual — a personal loan, a personal credit card, or a redraw or top-up on your home loan — and then using that money in the business. It's included for comparison only; we arrange business-purpose finance, not personal loans.

What does “borrow through the business” mean?

A business-purpose loan taken by the entity that runs the business: your company or trust, your partnership, or you under your ABN if you're a sole trader. It's assessed on the business's trading and recorded as business debt.

Is a sole trader's business loan still personal?

Legally, yes — a sole trader and the business are the same person, with unlimited liability. But a business-purpose loan under your ABN is assessed on your trading, run through your business account and recorded as business debt, which keeps records and future borrowing cleaner.

Does the tool tell me whether the interest is tax deductible?

No. The ATO's general rule is that an expense must be for your business and only the business portion of mixed-use costs can be claimed. Your accountant should confirm the treatment for your structure and loan.

Is the result an offer or approval?

No. It's general information to help you think through the choice. A specialist confirms what's actually possible once they understand your situation — and there's no credit check when you first enquire.

Why does the tool ask about my home?

Because the biggest personal risk in business borrowing is usually the family home — whether it's pledged directly as security, or exposed through personal liability as a sole trader or guarantor.