How to Use a Personal Loan to Start a Side Business

Notebook, laptop, and cash representing business loan financing
Funding startup costs for a side business—inventory, equipment, or marketing—can be challenging without tapping into savings. A personal loan offers predictable payments and fixed rates. In this guide, we’ll cover planning your budget, comparing lender offers, and managing repayments so your venture gets off to a strong start.

Table of Contents

1. Calculate Startup Costs

List all one-time and recurring expenses: equipment purchase, initial inventory, marketing campaigns, website setup, and any licenses or permits. Add a 10% contingency buffer for unforeseen costs.

2. Decide on Your Loan Amount

Sum your cost estimates plus buffer to determine the minimum loan you need. Avoid borrowing more than necessary to keep interest expenses down.

3. Compare Lender Offers

Prequalify with Upstart and LendingClub to view APRs, fees, and terms without affecting your credit score. Use our Personal Loan Calculator to model different scenarios.

4. Prepare Your Application

  • Gather proof of income and recent bank statements.
  • Prepare a one-page business plan summary with cost breakdowns.
  • Check your credit report and resolve any errors to secure the best rate.
  • Opt into autopay when available for a potential APR discount.

5. Manage Repayment Strategically

Align loan term with your projected side-business cash flow. If early profits are likely, choose a shorter term to save on interest. Automate payments and consider directing any extra revenue toward principal to pay off early.

This post contains affiliate links. We may earn a commission at no extra cost to you.

Get Started with Upstart → Get Started with LendingClub →

Conclusion

Using a personal loan to bootstrap your side business can accelerate growth while preserving savings. By accurately budgeting, comparing offers, and planning repayments, you’ll set your venture—and your finances—up for success.

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