What Can You Use a Business Loan for

U.S. Department Agriculture (USDA) Rural

You can use a business loan for almost any legitimate business purpose: equipment, inventory, working capital, payroll during a slow season, real estate, expansion, buying a business or refinancing existing debt. What you cannot do is spend it on personal expenses, speculation or anything the loan agreement excludes. Each loan type also has its own limits.

This guide is for owners and finance leads deciding how to fund a specific need, and for anyone who wants to avoid the common mistake of matching a short-term need with long-term debt, or the reverse.

Key takeaways

  • Most business loans cover equipment, inventory, working capital, real estate, expansion and refinancing.
  • The loan agreement, not the loan's name, defines what the money can be used for.
  • SBA programs have specific rules: 504 loans exclude working capital, and microloans cannot pay existing debt.
  • Match the loan term to the life of what you are buying.
  • Keep loan funds and records separate from personal money.

What are the most common uses of a business loan?

Lenders see the same handful of purposes again and again. Here is what each looks like in practice.

  • Equipment and machinery. Kitchen equipment, vehicles, manufacturing tools, computers and software. The equipment often serves as collateral, which can make approval easier.
  • Inventory. Stocking up before a busy season or taking advantage of a bulk discount from a supplier. Short-term financing usually fits best because the inventory turns into cash within months.
  • Working capital. Covering rent, utilities, payroll and supplier bills while you wait for customers to pay. Seasonal businesses and companies with long invoice terms rely on this most.
  • Real estate. Buying, building or renovating the property you operate from. These loans tend to have the longest terms.
  • Expansion. Opening a second location, entering a new market or launching a product line.
  • Hiring. Funding salaries for new staff until the revenue they generate catches up.
  • Marketing. A campaign, a website rebuild or a trade show presence tied to a clear growth plan.
  • Buying a business or a partner's share. Acquisitions and changes of ownership are common loan purposes.
  • Refinancing. Replacing expensive debt, such as merchant cash advances or high-rate credit cards, with cheaper or longer-term financing.

The SBA's own business plan guidance tells owners to specify whether they need funds to buy equipment or materials, pay salaries or cover bills until revenue increases. Lenders expect you to be just as specific.

What can SBA loans be used for?

SBA-backed loans are popular because of their terms, but each program has its own list of allowed uses. Here is a summary based on SBA's program pages:

ProgramAllowed usesNot allowed
7(a) loans (up to $5 million)Real estate, short- and long-term working capital, refinancing business debt, machinery and equipment, furniture, fixtures and supplies, changes of ownershipCheck eligibility rules with your lender; certain business types are ineligible
504 loans (up to $5.5 million)Buying, building or renovating buildings or land; long-term machinery with at least 10 years of useful life; some qualified debt refinancingWorking capital, inventory, speculation or rental real estate investment
Microloans (up to $50,000)Working capital, inventory, supplies, furniture, fixtures, machinery and equipmentPaying existing debts or buying real estate

Program details change, so confirm current limits with an SBA lender before you apply.

What can't you use a business loan for?

Even with a flexible term loan, there are things lenders will not fund or will treat as a breach of the agreement:

  • Personal expenses, such as a home, a family car or personal debt.
  • Speculative investments, such as stocks, crypto or property bought purely to resell.
  • Uses the agreement names as excluded, which is common in equipment and real estate loans that must go to a specific asset.
  • Illegal activities or business types the lender's policy excludes.

Misusing funds can lead the lender to call the loan, meaning the full balance becomes due. It can also blur the line between you and the business, which matters for liability and taxes. The IRS expects records that support business income and expenses, so deposit loan funds into a business account and keep receipts for what you buy.

How do you match the loan to the need?

The most useful rule is simple: the loan should last about as long as the thing it pays for keeps earning.

NeedTypical fitWhy
Seasonal inventory or a cash flow gapLine of credit or short-term loanYou repay as the cash comes back in
Vehicles, machines, computersEquipment financing or term loanThe asset secures the loan and lasts several years
Building or landCommercial mortgage or SBA 504Long useful life supports long repayment
Hiring or expansionTerm loan or SBA 7(a)Payoff depends on growth over a year or more
Expensive existing debtRefinancing term loanLower payments free up cash

A common mistake is using a short-term loan or a merchant cash advance to buy a long-life asset. The payments arrive long before the asset pays for itself, and the business ends up borrowing again to cover them.

A loan is also not the only option. If you are giving up equity, see our article on factors founders should weigh when raising venture capital. If you are growing a small operation, our guide on turning a side hustle into a growing business covers funding at that stage.

How do you prepare before you apply?

  1. Write down the exact use. List what you will buy, the cost and the quotes you have.
  2. Show how it pays back. Build a simple projection of the extra revenue or savings and when they arrive.
  3. Check your credit. The SBA notes that eligibility for newer businesses is often based on the owner's personal credit score, and poor credit history is a common reason applications are declined.
  4. Gather documents. Business plan, recent financial statements, tax returns, bank statements and any legal documents for the business.
  5. Compare total cost. Look at interest, fees and prepayment penalties, not just the monthly payment.

Also think about where you keep the money once it arrives. Our pieces on deposit insurance for small businesses and bank failures and small businesses explain how to protect large balances.

Frequently asked questions

Can I use a business loan to pay myself?

You can use loan funds for reasonable owner compensation if you are on payroll and the lender allows working capital use. You should not move loan money straight into a personal account for personal spending. If owner pay is part of your plan, say so in the application and keep it consistent with your normal salary.

Can I use a business loan to start a business?

Yes, though it is harder because there is no revenue history. Lenders lean on your personal credit, savings, collateral and business plan. SBA microloans and 7(a) loans through participating lenders are common starting points. Expect to put some of your own money in, and have clear projections ready.

Is interest on a business loan tax deductible?

Interest on money borrowed and used for business purposes is generally deductible as a business expense, but rules change and there are limits, especially if funds are mixed with personal use. Keep the loan in a business account, track how every dollar is spent and confirm the treatment with a tax professional.

What to do next

  • Write a one-page funding request that names the exact use, the amount and how it will be repaid.
  • Match that use to a loan type using the table above, and check SBA program rules if you want an SBA loan.
  • Open or confirm a dedicated business bank account for loan funds.
  • Get quotes from at least two lenders and compare total cost, not just rate.

Sources

Last reviewed: October 2026.

Comments

Post a Comment

Popular Posts

Why Workday Onboarding Breaks Down for Frontline Employees

Image
Workday onboarding breaks down for frontline employees because its default setup assumes every new hire has an email address, a personal device, time at a desk and comfort with a web portal. Warehouse, retail, food service and healthcare aide roles often have none of those. The fix is mostly configuration and process, not a new system. This guide is for HR, HRIS and operations leaders who run Workday and keep seeing incomplete onboarding records, late I-9s and new hires who quit before their first paycheck. Key takeaways Default Workday onboarding is built around desk workers. Frontline failures are predictable and mostly fixable through configuration. The five usual breakpoints are email-based logins, no reliable device, digital comfort, shift timing and language. Split compliance-critical tasks (I-9, tax forms, direct deposit) from tasks that can wait, and handle I-9 in person. Kiosks, ID-based logins, text reminders and a supervisor checklist close most of the gap. Measure...
Read more

Interview Tips for Beginners: A Step-by-Step Prep Plan

Image
The best interview tips for beginners come down to preparation you can repeat: study the job description, research the employer, prepare four to six short stories that prove your skills, practice answering out loud, prepare your own questions and follow up within a day. Confidence comes from rehearsal, not from experience you don't have yet. This plan is for students, recent graduates and career changers facing their first few interviews, and for anyone who freezes when asked "tell me about yourself." Key takeaways Match your preparation to the job description, line by line. Use the STAR format (situation, task, action, result) for behavioral questions. School, volunteer and part-time examples count when you have little work history. Practice aloud at least twice; silent rehearsal isn't enough. Prepare two or three thoughtful questions for the interviewer. What does a one-week interview prep plan look like? If you have an interview scheduled, this plan s...
Read more

How to Improve the Customer Experience (CX)

Image
To improve customer experience, find the moments where customers struggle most, fix those first, and make good service consistent across every channel. Then close the loop on feedback, give front-line staff the time and tools to solve problems, and track a small set of metrics someone actually owns. This guide is for leaders and managers who own some part of the customer relationship, whether that's support, sales, operations or the product itself. Customer experience is the sum of every interaction someone has with your company, from the first ad they see to how a return is handled years later. Teams that struggle usually confuse a good satisfaction score with real improvement, or fix the wrong things. Key takeaways Look at behavior (drop-offs, ticket spikes, failed searches), not just surveys. Fix the biggest sources of friction before polishing what already works. Collecting feedback and doing nothing with it makes customers more frustrated. Consistency across people a...
Read more

Are Biometrics Better Than Passwords? What NIST Says

Image
Biometrics beat passwords in some ways and lose in others. You can't forget a fingerprint, reuse it across sites or type it into a phishing page, so logins get faster and harder to steal. But you can't change a face if its data leaks, which is why NIST says a biometric should never be used alone, only alongside a physical device. This guide is for IT, security and HR leaders deciding how far to move their workforce away from passwords. Key takeaways Biometrics fix common password problems: reuse, weak choices and forgotten credentials. NIST SP 800-63B says a biometric "is not recognized as an authenticator by itself." The strongest pattern is a biometric that activates a key stored on a device, as with passkeys and security keys. Workplace biometrics bring notice, consent and retention duties under some state laws. Always offer a non-biometric alternative. Why do passwords keep failing? Passwords depend on people choosing, remembering and guarding secret...
Read more

How to Market Your Handyman Services to Small Business Owners

Image
To market handyman services to small business owners, position yourself as the reliable, flexible vendor who can handle many small jobs with little disruption. Make your Google Business Profile and website clearly commercial, pick two or three business types to target, visit them in person, offer a simple service account, and ask every client for reviews and referrals. This is for independent handymen and small maintenance crews who rely on word of mouth and want a steadier flow of repeat commercial work. Referrals are great until they dry up for a month. Small businesses are a strong target because they have constant maintenance needs, little in-house help, and a clear preference for vendors they can call again and again. Key takeaways Business owners buy speed, reliability and minimal disruption, not just repairs. Say that in your marketing. Your Google Business Profile should clearly describe commercial work and the business types you serve. Focus on a few business types (r...
Read more

Are Mobile Apps Tracking Your Every Move? How to Check

Image
Mobile apps can track your location and activity, but only as far as the permissions on your phone allow. Open your privacy settings, find apps with "always" location access, switch most to "while using" or off, limit your advertising identifier and delete apps that ask for more than they need. Ten minutes covers most of it. This is for anyone who has noticed ads that seem to know where they've been, or who simply hasn't looked at app permissions since setting up the phone. Key takeaways Location, contacts, photos, microphone and camera access are all controlled by per-app permissions. Background ("always") location access is the setting most worth reviewing. Advertising identifiers let companies link your activity across apps; you can limit or reset them. Turning off location doesn't stop account-based tracking inside apps you sign in to. Work phones can carry extra monitoring set by your employer, governed by company policy. How ...
Read more

Predictive Scheduling Laws: Where They Apply and How to Comply

Image
Predictive scheduling laws require covered employers to give hourly workers their schedules in advance, usually 14 days, and to pay a premium when the employer changes a shift after posting. Oregon has a statewide law, and cities including Seattle, New York City, Chicago, Los Angeles, San Francisco and Philadelphia have their own ordinances. This guide is for HR, operations and payroll leaders who schedule hourly staff in retail, restaurants, hospitality and similar industries across more than one location. This article is general information, not legal advice. Key takeaways The federal Fair Labor Standards Act has no rules on scheduling adult employees, so predictive scheduling (also called fair workweek or secure scheduling) duties come from state and city law. Oregon, Seattle, Los Angeles, Philadelphia and New York City fast food all require schedules at least 14 days in advance for covered workers. Coverage usually depends on industry plus a size threshold, such as 500 emp...
Read more

Boss Retaliation and False Accusations: Protect Yourself

Image
To protect yourself from boss retaliation and false accusations, keep a dated written record, answer accusations with facts rather than anger, use your employer's complaint channels, and learn which laws cover you. Retaliation for protected activity, like reporting discrimination or a safety hazard, is illegal under federal law, and agency filing deadlines can be very short. This guide is for employees who sense that something changed after they spoke up, and for anyone suddenly facing an accusation they know is untrue. Key takeaways Retaliation is illegal when it follows protected activity, such as reporting discrimination or safety concerns. A dated, factual record is your strongest protection. Respond to false accusations in writing, with evidence, and without counterattacking. Use internal channels first when it's safe, but know the external deadlines. An employment attorney can advise on your specific situation. This article is general information, not legal a...
Read more

Dollar General Store Walkout: Lessons for Retail HR

Image
In March 2024, every employee at a Dollar General store in Mineral Point, Wisconsin, quit at once and taped "We quit" signs to the doors. They cited a lack of appreciation, being overworked and being underpaid, plus a dispute over a rule about which unsold items could be donated. The store reopened about three hours later. The story went viral because it was so visible, but the lesson is quieter. For HR and operations leaders who run hourly, small-team locations, this is a case study in how a minor policy can become the last straw. Key takeaways A policy change triggered the walkout, but the notes employees left pointed first to workload, pay and recognition. Rules that clash with frontline values, such as throwing away usable goods, become flashpoints when trust is already low. Explaining why a rule exists, and giving local teams a way to push back, costs far less than losing a whole store team. Treat a mass resignation as a lagging indicator. The warning signs show...
Read more

How Do I Log In and Sign In to Workday HCM

Image
To log in to Workday HCM, open your organization's own Workday URL (there's no single public login page), then sign in either with your Workday username and password or through your company's single sign-on. If you're locked out, use "Forgot password" for native logins, or your corporate password reset for SSO, and contact HR or IT if neither works. This guide is for employees and managers signing in for the first time, people who've just switched employers, and anyone stuck at the login screen. Most Workday access problems come down to the wrong URL, the wrong login method, or an account that needs an admin to reset it. Key takeaways Each employer has its own Workday tenant and URL. Get it from HR, IT or your onboarding email; don't guess. If your company uses SSO, your Workday password is your normal work password, and resets happen through your company, not Workday. The mobile app asks for your organization's details first, then signs y...
Read more