Personal Loan? Buy a Business Fast (2026 Guide)

Thinking about buying a business but unsure how to finance it? You're not alone. Many aspiring entrepreneurs grapple with the question of whether they can use a personal loan to purchase a business. The answer is not straightforward, and it depends on various factors including lender policies, interest rates, and your personal financial situation. In this guide, we'll unpack whether a personal loan is a viable option for buying a business and explore alternative financing options that may better suit your needs.

Understanding Personal Loans

Personal loans are typically unsecured loans offered by banks, credit unions, and online lenders. They are designed for individual use and can be utilised for various purposes, from consolidating debt to funding major purchases. However, using a personal loan to buy a business is not as common as other types of loans, like business loans or commercial loans.

Personal loans generally range from $5,000 to $50,000 in Australia, with interest rates varying between 6.49% to 12%. They often have fixed terms, making budgeting easier as you'll know the exact amount you'll pay each month. However, because they are unsecured, lenders consider them riskier, which often results in higher interest rates compared to secured loans.

Interest Rates, Requirements, and Options

When considering a personal loan for buying a business, it's crucial to compare the interest rates and terms from various lenders. Esteb and Co, with access to 83+ lenders, can help you navigate this complex landscape.

Eligibility criteria for personal loans typically include a good credit score (650+), stable income, and a low debt-to-income ratio. Lenders will assess your ability to repay the loan based on these factors.

While personal loans can be used for almost any purpose, some lenders may have restrictions on using them for business purposes. It's essential to disclose your intended use when applying to avoid any issues with your lender.

How to Use a Personal Loan to Buy a Business

If you've decided that a personal loan is the right option for you, follow these steps to ensure a smooth process:

1. Evaluate Your Needs: Determine the amount you need to purchase the business and cover any initial operating expenses.
2. Check Your Credit Score: A good credit score increases your chances of securing a loan with favourable terms. Obtain a free credit report to understand your standing.
3. Research Lenders: Use Esteb and Co's network of 83+ lenders to find those offering personal loans with terms that suit your situation.
4. Prepare Documentation: Gather necessary documents such as proof of income, identification, and any business plans or financial projections.
5. Apply for the Loan: Submit your application to the lender with the best terms. Be honest about your intention to use the loan for business purposes.
6. Utilise the Funds: Once approved, use the funds to purchase the business and manage initial expenses.

Tips and Considerations

Before committing to a personal loan for buying a business, consider the following expert advice:

• Explore Other Financing Options: Business loans, SBA loans, or investor funding might offer better terms and higher borrowing limits.
• Understand the Risks: Using a personal loan ties your personal assets to business success. If the business fails, you're still liable for the loan.
• Consult a Financial Advisor: A professional can provide tailored advice based on your financial situation and business goals.
• Review Loan Terms Carefully: Pay attention to interest rates, fees, and repayment terms to avoid financial strain.
• Consider a Co-Signer: If your credit score is less than ideal, a co-signer with a stronger financial profile may help secure better loan terms.

Frequently Asked Questions

1. Can I use a personal loan to buy a franchise? Yes, but it's essential to check with lenders as some may have restrictions on using personal loans for business purposes.
2. Are there specific personal loans for business purposes? While personal loans are not specifically designed for business, some lenders may offer flexibilities for such uses.
3. What are the alternatives to personal loans for buying a business? Consider business loans, business lines of credit, or investor funding as alternatives.
4. Is it risky to use a personal loan for business? Yes, it can be risky as you are personally liable for the debt, regardless of business performance.
5. How can Esteb and Co help in finding the right loan? Esteb and Co can leverage their access to 83+ lenders to find competitive rates and terms that match your needs.