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You’re our first priority. Every time. We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free. So how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Here is a list of our partners. What Happens If You Use a Business Loan for Personal Expenses? You shouldn't use a business loan for personal purposes. It violates your loan agreement and can have negative consequences for your company. Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money. Published Nov 6, 2025 8:04 a.m. PST · 2 min read How is this page expert verified? NerdWallet's content is fact-checked for accuracy, timeliness and relevance. It undergoes a thorough review process involving writers and editors to ensure the information is as clear and complete as possible. Written by Senior Writer & Content Strategist 10 years of experience Expertise Small business business lending business banking Randa Kriss is a senior writer and NerdWallet authority on small business. She has nearly a decade of experience in digital content. Prior to joining NerdWallet in 2020, Randa worked as a writer at Fundera, covering a wide variety of small-business topics and specializing in the lending and banking spaces. Her work has been featured in The Washington Post, The Associated Press, MarketWatch and Nasdaq, among other publications. She has also hosted a webinar as part of the SBA's 2024 National Small Business Week Virtual Summit. Randa is passionate about helping small-business owners make educated financial decisions, especially when it comes to affordable funding. She is based in New York City. Published in Senior Writer & Content Strategist + more Edited by Managing Editor 14 years of experience Expertise Business financing SBA loans starting a business Sally Lauckner is an editor on NerdWallet's small-business team. She has more than a decade of experience in online and print journalism. Before joining NerdWallet in 2020, Sally was the editorial director at Fundera, where she built and led a team focused on small-business content and specializing in business financing. Her prior experience includes two years as a senior editor at SmartAsset, where she edited a wide range of personal finance content, and five years at the AOL Huffington Post Media Group, where she held a variety of editorial roles. She is based in New York City. Managing Editor + more Key takeaways You shouldn’t use a business loan for personal expenses. Using business loan funds for personal expenses violates your loan agreement and can lead to financial, tax and legal consequences. If you need cash for personal expenses, consider paying yourself from your business, using a personal credit card or a personal loan. When cash is tight, it can be tempting to dip into your business loan to cover personal expenses like mortgage payments or groceries. But doing so can violate your loan agreement and put you and your business at risk. How much do you need? with Fundera by NerdWallet We’ll start with a brief questionnaire to better understand the unique needs of your business. Once we uncover your personalized matches, our team will consult you on the process moving forward. Consequences of using a business loan for personal expenses You may face financial, tax and legal consequences. Breach of loan agreement Business loans are meant to be used for your business. This is typically outlined in your loan agreement. If you use your business loan for personal expenses, you’re breaking that agreement. This could lead to loan default and your lender might demand full repayment immediately — something that many small businesses can’t afford to do on short notice. Example: Wells Fargo Business Line of Credit agreement that specifies business use. » MORE: What happens if you default on a business loan? Future funding problems Tapping into business loan money for personal expenses can hurt your chances of getting approved for future loans. If you default, this can harm your credit score, making it harder to get financing. Violating your loan agreement can also damage your reputation with lenders. When you apply for a loan, lenders often check your business bank statements. Personal transactions or unexplained withdrawals can raise red flags and lower your chances of approval. Tax issues Mixing your personal and business finances makes your bookkeeping and taxes more complicated. It also makes your business tax deductions harder to justify to the IRS. Usually, you can deduct interest paid on a business loan. But if you use any of your loan funds for personal expenses, you might lose that deduction. If you claim a business loan interest tax deduction anyway, the IRS may count that money as personal income, which may lead to more taxes, penalties and even audits. Legal exposure LLCs and corporations offer limited liability, meaning your personal assets are protected from creditors trying to collect from the business. However, mixing your business loan funds with personal spending can jeopardize this protection by creating a situation called “piercing the corporate veil.” If this happens, your personal assets could be at risk if you’re sued or declare bankruptcy. Using business funds for personal expenses can also lead to claims of fraud or misuse, especially if you have partners or shareholders. These claims can lead to fines, legal fees or more serious consequences. Expert on the ground “At the end of the day, business owners don’t get in trouble for running lean, they get in trouble for running loose. Keep those lines clean and you protect not just your company — but your reputation — and that’s something no loan can buy back.” Ethan Aiem | CEO of Klendify Alternative ways to cover personal expenses If you need cash to pay your personal expenses, don’t use your business loan. Instead, you can consider: Paying yourself Paying yourself as a business owner is the appropriate and legal way to use business funds for personal expenses. You can pay yourself in two ways: Salary. You can pay yourself a regular salary just as you would any other employee of the business. You pay yourself a “reasonable” salary — meaning it’s comparable with someone else doing the same job in your industry — and withhold taxes from your paycheck. Owner’s draw. You take money from your business profits when needed. The amount you can take depends on your owner’s equity (the money you’ve invested in the business and any profits that haven’t been spent). You don’t have to pay taxes every time you draw money, but you should regularly set aside money for your tax bill. Make sure you accurately record payments and transfer the funds from your business to your personal account to avoid accounting and legal complications, like those we discussed above. » MORE: How to pay yourself without killing your business Personal credit card A personal credit card can be a quick and easy way to cover personal expenses — as long as you can pay your balance at the end of the month. If you can’t, you’ll be charged interest on the balance, which increases your costs. Personal loan If you need to cover larger expenses, such as home renovations or wedding costs, you might get a personal loan. With a personal loan, you receive a lump sum of money from a lender and repay it with interest. Eligibility is based on your personal credit history and finances. » MORE: Business loan vs. personal loan More like this
