On this page
A business loan and a personal loan can put the same amount into a bank account but create different obligations. Start with who is borrowing, what the lender permits the money to fund and who remains liable if the business cannot pay. A low advertised rate is not enough to choose between them.
A personal loan in an owner’s name remains their debt even if its proceeds go into a company. A company business loan may still require a personal guarantee. “Business” does not automatically isolate the owner’s assets, and “personal” does not establish that business use is permitted.
Compare the structure before the price
| Question | Business borrowing | Personal borrowing for business use |
|---|---|---|
| Who borrows? | The named company, trustee, partnership or sole trader | The individual named in the agreement |
| Is the purpose permitted? | Check the product’s permitted business purposes | Obtain confirmation that business use is allowed |
| What supports the debt? | Business cash flow, assets and possibly guarantees | Personal income, assets and credit assessment; business income may matter |
| Who bears the downside? | Borrower plus any guarantor; security terms matter | Individual borrower, even if the business fails |
| How is cost compared? | Cash received, all payments, fees and payout terms | The same complete cash-flow comparison |
| Is interest deductible? | Depends on use of funds and tax circumstances | Business use may matter, but the product name does not decide it |
Rates and fees: compare the same amount and term
Ask for the net amount received after any fee deduction and every scheduled payment. Include establishment, ongoing, drawdown and exit charges. A shorter personal loan can cost less in total but require a larger monthly payment. A business facility with daily debits may be harder to service than a monthly schedule even when its total cost looks similar.
For an illustration, borrowing $50,000 over three years at a fixed 12% annual reducing-balance rate requires about $1,660.72 a month and $9,785.76 total interest, using unrounded monthly payments and no fees. This is a hypothetical SMBLoan calculation, not a quote. The purpose is to place a complete schedule in the cash forecast; the interest-rate guide explains factors, flat charges and fees.
For a seasonal business, test the weak month as well as the annual average. A personal repayment funded from the owner’s wages still depends on the business if that business pays those wages. Do not count the same cash twice as both company surplus and the owner’s independent repayment source.
Tax deductibility follows the use of funds
The ATO’s interest-deductibility ruling TR 95/25 explains the connection between borrowing costs and income-producing use. The account or product label does not, by itself, make interest deductible. Principal repayments are not an interest expense.
Keep a traceable record of how the borrowed money was used. Mixed private and business use can require apportionment. Redrawing, refinancing and moving funds between accounts can complicate the tracing exercise. Have a registered tax adviser review the actual structure before treating a projected tax deduction as a saving.
An owner lending to a company is a separate transaction
If an owner borrows personally and then advances money to a company, record both arrangements. Identify whether the contribution is equity or a loan, who owes whom, any interest and repayment terms, and the company approvals and accounting entries. Transferring money through the same bank does not remove these distinctions.
Money moving the other way can raise different issues. Certain private-company payments or loans to shareholders or associates can fall within Division 7 A. Do not assume a company can meet an owner’s private bills tax-free. The ATO’s Division 7 A guidance is a starting point for advice on the particular transaction.
Credit checks and personal guarantees
Ask which credit files will be checked, whose consent is required and what the provider reports. A business application can involve a director’s personal credit file. A personal application is not insulated from business risk merely because the agreement is in an individual’s name.
Before signing a guarantee, establish the amount covered, whether it extends to future facilities, the security involved and the release conditions. A director leaving the business is not necessarily the same as a lender releasing the guarantee. Read the actual documents rather than relying on a product’s “unsecured” label.
When a lender requires a business product
Some personal products restrict business use. Check this before applying and describe the intended use accurately. If the lender does not allow the proposed purpose, a cheaper advertised personal rate is not an available alternative. The business may need a term loan, equipment finance, invoice facility or line of credit instead.
Match the facility to the source of repayment. An asset expected to earn income over several years creates a different need from an invoice due next month. Compare changing supplier terms, delaying the purchase or using available equity alongside taking new debt.
What 210 owners reported in December 2022
The December 2022 survey concerns transfers between owners and businesses, rather than the relative price or approval rate of personal and business loan products. Its reported responses on borrowing from the business were 26% already had, 30% would if needed and 44% never would. The earlier combined 54% headline did not reconcile with its 26% and 30% components and has been withdrawn, along with a 72% personal-funding headline whose components did not reconcile.
The original report was published on 3 January 2023 and labelled December 2022; exact fieldwork dates have not been independently recovered. Recruitment, response rate, weighting and subgroup respondent counts are unavailable and have not been reconstructed from rounded percentages. The archived questions and subgroup tables describe those respondents at the time. They cannot establish current lending behaviour, tax treatment, statistically reliable subgroup differences or national representativeness.
Read the corrected December 2022 survey archive
About the Study
SMB Loan commissioned a survey of 210 SME business directors to find out if they have ever rescued their businesses using personal funds, or solved personal problems by borrowing from the business.
Explanatory correction, 5 October 2026: The original article overstated the rules for transfers between owners and businesses. A transfer should not be assumed to be tax-free or to require no documentation. Its treatment depends on the business structure, the parties and the terms. Certain private-company payments and loans to shareholders or associates can fall within Division 7 A; see the ATO guidance. Obtain advice for the actual arrangement. The survey questions and results below are unchanged.
Respondents were asked if they had borrowed money from their business, or would, to resolve personal financial issues and if they would draw on personal finances if their business needed funds, including drawing equity from property, using personal savings, taking out a personal loan or selling high value items.
The survey covered 210 owners and senior decision-makers. Its original labels were micro (1–10 employees), small (11–50), medium (51–200) and large (200+). The final two labels overlap at 200. Without the questionnaire or respondent file, we cannot establish whether 200 belonged to one group or the other; no corrected boundary or subgroup base is invented.
Have directors ever borrowed money from their businesses to help their personal finances, or resolve personal financial issues?
The published response options were: 26% had already borrowed from their business, 30% would do so if needed, and 44% had not and never would. These rounded figures sum to 100%; the earlier combined 54% headline was incorrect and has been withdrawn.
Forty four (44 per cent) of businesses had never loaned money from their business to resolve personal financial issues, and never would.
By business size.
Micro businesses are least likely to ever mix personal and business finances, with 50 per cent specifying they had never borrowed money from their businesses, and never would. This was followed by 47 per cent of medium- sized businesses and only 26 per cent of small businesses.
1 in 3
A third of small businesses (32 per cent) have borrowed money from their businesses in the past to resolve personal financial troubles. A quarter (26 per cent) of micro businesses had done the same, followed by 18 per cent of medium sized businesses.
By State.
When comparing responses across the major States, SMEs in Victoria are most likely to borrow money from their businesses to aid personal finances, with 66 per cent having borrowed previously or will in the future. This is followed by 62 per cent of Western Australian businesses, 54 per cent of NSW and an equal 47 per cent of Queensland and South Australian businesses.
| Response | |||||
|---|---|---|---|---|---|
| State (%) | |||||
| NSW | VIC | QLD | SA | WA | |
| Yes | 27 | 25 | 18 | 20 | 48 |
| No, but I would in future if needed | 27 | 41 | 29 | 27 | 14 |
| No, and I never would | 46 | 34 | 53 | 53 | 38 |
Would directors draw on their personal finances if their businesses were in financial difficulty?
Businesses could nominate from the following personal finances they would draw on to aid their businesses, if needed:
- Equity from their property (by refinancing their mortgages)
- Personal cash savings
- Personal loan
- Selling a car or other high value personal item
- Other.
More small business directors (82 per cent) have, or would, contribute personal finances to their businesses in some way, followed by 70 per cent of directors of micro business directors and 66 per cent of medium sized businesses.
Micro business directors are most likely, by a significant margin, to draw on cash savings, chosen by half (48 per cent), compared with 33 per cent of small business directors and only 18 per cent of directors of medium sized businesses. Directors of small and medium sized businesses felt more comfortable taking out a personal loan, chosen by 28 and 29 per cent respectively, compared with 10 per cent of micro business directors.
South Australian business directors are most likely to withdraw equity from their property (chosen by 27 per cent) than directors in any other State. This is followed by 24 per cent of Western Australian, 20 per cent of NSW and an equal 16 per cent of both Victorian and Queensland businesses.
| Response | |||||
|---|---|---|---|---|---|
| State (%) | |||||
| NSW | VIC | QLD | SA | WA | |
| Yes, I would draw equity from my property | 20 | 16 | 16 | 27 | 24 |
| Yes, I would draw on personal cash savings | 29 | 39 | 33 | 47 | 33 |
| Yes, I would take out a personal loan | 18 | 25 | 18 | 20 | 14 |
| Yes, I would sell my car and or other high value personal items | 5 | 9 | 4 | 20 | 0 |
| Yes, but in another way | 8 | 11 | 9 | 7 | 0 |
| No | 30 | 18 | 38 | 20 | 33 |