Table of contents
Hamburger menu icon

Should I Use a Personal Loan for My Business?

By Wave
By Wave
Reviewed by
January 16, 2017
5 minutes read

This is a condensed version of an article by OnDeck. Reprinted with permission.

By Ty Kiisel

Many small business owners leverage their personal credit in the early years of starting a business, but as quickly as is possible, it’s better for a business to start building business credit. Here’s why.

A personal loan doesn’t help build your business credit

Building a strong business credit foundation should be a priority during the first few years in business. This can feel like a catch-22—you need to have business credit to demonstrate you can be responsible with business credit, but you can’t get business credit because you don’t have a track record that demonstrates you can be responsible with business credit. A challenge? Yes. But there are some things you can do.

One option is pursuing trade credit relationships with their suppliers, according to Peter Bolin, Director of Consulting and Analytics for Experian, in an interview published last year on BusinessLoans.com. “Make sure they report to the credit bureaus, like Experian,” he adds. If they don’t, your good credit practices may be building a good credit record with that particular vendor, but you’re not doing anything to build you business credit generally. This is important enough to encourage those suppliers who don’t report to do so.

You can also apply for a business credit card, or for a small business loan via specialized small business lenders like Lending by Wave, in partnership with OnDeck, and make sure you make those payments on time. This will dramatically increase the depth of your credit report so when you do need that $100,000 from the bank or other lender, you’ll be likely to get approved.

You might be hurting your personal credit score

Maintaining a good personal credit score will always be important. With that in mind, using your personal credit for business expenses might not be the right choice.

A big part of your personal credit score is based upon how much credit you have available versus how much credit you actually use. Maxing out a credit card, for example, could negatively impact your personal credit score. This may be true even if you regularly make the required payment every month.

When I recently asked if using personal credit for business might hurt a borrower’s personal credit score, Bolin’s response was, “Yes, it does. Their higher utilization of personal credit to the credit available to them pulls down their personal scores.”

Business owners will always find a way for their projects to survive and succeed. But to be successful in the long run, remember to preserve your personal credit reputation AND build a business credit score at the same time.

—Ty Kiisel writes about small business and small business finance for OnDeck, and outlets like Forbes.com. An expanded version of this article, with additional questions for you and your potential lender, is available at OnDeck.

Wave now offers Lending by Wave — small business loans and lines of credit, powered by OnDeck. Learn more and apply for a loan in minutes: waveapps.com/lending

starter
Plan
starter
Plan
$0
pro
Plan
$16USD
$20CAD/mo
Option to accept online payments
Starting at
2.9% + $0.60
per credit card transaction
Starting at
2.9% + $0*
per credit card transaction
for first 10 transactions/mo
Unlimited invoices, estimates, bills
Add your logo and brand colors
Automate late payment reminders
with online payments
Wave mobile app
Unlimited bookkeeping records
Dashboard and reports
Auto-import transactions
Auto-merge transactions
Auto-categorize transactions
Add users
Live-person chat and email support
with any paid add-on
Digitally capture unlimited receipts
additional fee
Payroll
additional fee
additional fee
Hire a bookkeeper
additional fee
additional fee
Option to accept online payments
Starting at
2.9% + $0.60
per credit card transaction
Starting at
2.9% + $0*
per credit card transaction
for first 10 transactions/mo
Unlimited invoices, estimates, bills
Add your logo and brand colors
Automate late payment reminders
with online payments
Wave mobile app
Unlimited bookkeeping records
Dashboard and reports
Auto-import transactions
Auto-merge transactions
Auto-categorize transactions
Add users
Live-person chat and email support
with any paid add-on
Digitally capture unlimited receipts
additional fee
Payroll
additional fee
additional fee
Hire a bookkeeper
additional fee
additional fee
starter
Plan
$0
Legacy businesses
New businesses
pro
Plan
$16USD or
$20CAD/mo
starter
Plan
$0
Legacy businesses
New businesses
pro
Plan
$16USD or
$20CAD/mo
Invoicing + payments
Option to accept online payments
(and create unique links with checkouts)
Starting at
2.9% + $0.60
per credit card transaction
Starting at
2.9% + $0.60
per credit card transaction
Starting at
2.9% + $0*
per credit card transaction
for first 10 transactions/mo

Send invoices, estimates, and other docs:

  • via links or PDFs
  • automatically, via Wave
with online payments
with online payments
Automate late payment reminders
with online payments
with online payments
Add your logo and brand colors
Remove Wave branding from footers
Add attachments to invoices and estimates (NEW!)
Create reusable message templates (NEW!)
Invoice and estimate in the mobile app
Accounting
Unlimited bookkeeping records
Auto-import bank transactions
Auto-merge and categorize transactions
Add users to your business
businesses already auto-importing bank transactions and/or that already have users added to their businesses as of May 1, 2024
Digitally capture unlimited receipts
with receipts add-on
with receipts add-on
Manage accounting transactions in the mobile app and sync with desktop (NEW!)
with receipts add-on
with receipts add-on
Other Wave features
Dashboard and reports
Live-person chat + email support
with any optional add-on
with any optional add-on
Optional add-ons
Receipts
nothing changes
additional fee
included
Payroll
nothing changes
additional fee
additional fee
Advisors
nothing changes
additional fee
additional fee
Invoicing + payments
Option to accept online payments
(and create unique links with checkouts)
Starting at
2.9% + $0.60
per credit card transaction
Starting at
2.9% + $0.60
per credit card transaction
Starting at
2.9% + $0*
per credit card transaction for first 10 transactions/mo
Send invoices, estimates, and other docs via links or PDFs
Send invoices, estimates, and other docs automatically, via Wave
with online payments
with online payments
Automate late payment reminders
with online payments
with online payments
Add your logo and brand colors
Remove Wave branding from footers
Add attachments to invoices and estimates (NEW!)
Create reusable message templates (coming NEW!)
Invoice and estimate in the mobile app
Accounting
Unlimited bookkeeping records
Auto-import, -merge, and -categorize bank transactions
businesses already auto-importing bank transactions and/or that already have users added to their businesses as of May 1, 2024
Add users to your business
businesses already auto-importing bank transactions and/or that already have users added to their businesses as of May 1, 2024
Digitally capture unlimited receipts
with receipts add-on
with receipts add-on
Manage accounting transactions in the mobile app and sync with desktop (NEW!)
with receipts add-on
with receipts add-on
Other Wave features
Dashboard and reports
Live-person chat + email support
with any optional add-on
with any optional add-on
Optional add-ons
Receipts
nothing changes
additional fee
included
Payroll
nothing changes
additional fee
additional fee
Advisors
nothing changes
additional fee
additional fee

*While subscribed to Wave’s Pro Plan, get 2.9% + $0 (Visa, Mastercard, Discover) and 3.4% + $0 (Amex) per transaction for the first 10 transactions of each month of your subscription, then 2.9% + $0.60 (Visa, Mastercard, Discover) and 3.4% + $0.60 (Amex) per transaction. Discover processing is only available to US customers. See full terms and conditions for the US and Canada. See Wave’s Terms of Service for more information.

By Wave
Categories:

The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.

Create your Wave account today.

Let's do this