How One Entrepreneur Built a Successful Business Using a Personal Loan and Credit Cards

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Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

Mike Seper on a zip line

Mike Seper was no stranger to the zip line business when he started Eco Adventure Ziplines in 2017. The Missouri-based business is his second zip line facility since 2010. Despite the success of his first business, however, Seper needed help funding his new venture.

He had trouble finding a business loan because his new startup had no credit history or assets, so he turned to a personal loan and 0% APR credit cards to build a new facility.

The average medium-term business loan, which offers one- to five-year repayment terms, is $110,000, according to small business lending marketplace Fundera. Fortunately, Seper needed less than half of that to build his business. In the past few years, the business has done so well that Seper started a third business, Zipline Innovations, which provides safety gear for other zip line facilities.

As I interviewed Seper about his experiences, he shared three pieces of advice that other entrepreneurs can follow as they start their own businesses.

1. Be realistic about funding sources

Small business loans are often preferable for business owners because they don’t necessarily require you to personally guarantee repayment. But for the most part, business loans can be hard to get for startups with no business credit history or revenue. Microloans insured by the U.S. Small Business Administration are designed for new businesses, but the process of getting one can take months.

So while a personal loan and credit cards weren’t Seper’s first choice, he knew his options were limited.

“I think that’s the only way we were going be able to qualify for [funding] because there was no track record with that business,” said Seper. “Commercial lenders weren’t willing to lend money for a zip line facility when there was nothing they could really take from us if we were to go under.”

Personal loans and credit cards are easy to get if your credit is good. They’re unsecured by nature, so you don’t have to put up collateral to get approved. But using these products to fund your business also comes with drawbacks.

For starters, you’re putting your personal financial health on the line. If your business doesn’t take off, you’ll have to pay off the debt out of your own pocket. And if you can’t manage to repay the loan, a default could damage your credit, making it hard to qualify for affordable loans in the future.

Personal loans also tend to offer lower loan limits than small business loans, which is why Seper had to split his funding between a loan and credit cards.

It’s important to understand the benefits and drawbacks of using a personal loan to build a business, but it’s also important to be realistic about your options.

2. Have a solid business plan

Personal loans and credit cards don’t require a business plan to prove that your idea is viable. But it’s still wise to create one to avoid putting yourself in a precarious position.

“Some people let the excitement get the best of them and are happy to jump at whatever they’re offered,” said Seper. “Do your homework and make sure you have a viable product or service before going all in on something.”

Creating a business plan entails a lot of things, such as:

  • A description of your product or service
  • A market analysis detailing your audience and potential competitors
  • Your marketing and sales strategy
  • Financial projections, including sales, expenses, assets, and liabilities

Without a proper business plan, it can be hard to put together a solid strategy. And with a shaky strategy, your chances of failure increase, putting the burden on you to repay the loan.

3. Repay the personal loan as soon as possible

Since personal loans are unsecured, they often charge higher interest rates than small business loans. With excellent credit and a solid income, you might be able to qualify for a single-digit interest rate. But even some of the top personal loan companies charge interest rates as high as 30.00% or more.

Credit cards can be more expensive if you draw out your repayment plan. In March 2018, the average credit card interest rate was 15.32%, according to the Federal Reserve. Due to high rates, Seper’s top priority was to get rid of his credit card debt before the end of their 0% APR promotions.

But he didn’t stop there. He also tackled his personal loan debt by accelerating repayment.

“[My accountant and I] worked on paying things back as quickly as possible to get the interest that was occurring paid off,” he said. Seper doesn’t remember how long it took to eliminate the debt but remembers paying it off before the end of the loan term.

Don’t give up

Building a business isn’t easy, and you can be tempted to give up if things don’t work out as planned. If you’re using a credit card or personal loan to build your business, it’s important to be persistent.

“A lot of businesses fail because people give up on them and stop believing that they can make it work, and just turn their back on an opportunity that might be just right around the corner,” said Seper. “Perseverance is essential. Try to make it through the lean times. Don’t cut and run when things get hard.”

As you follow this advice and the other lessons Seper learned as he started his business, you’ll have an easier chance of building a successful startup. What’s more, you’ll improve your chances of getting through the process without putting too much strain on your financial health.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal LoansFixed rates from 6.199% APR to 15.365% APR (with AutoPay). Variable rates from 6.145% APR to 14.685% APR (with AutoPay). SoFi rate ranges are current as of June 15, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.145% APR assumes current 1-month LIBOR rate of 1.97% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. Terms and Conditions Apply:SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.73% – 29.99%$1,000 - $50,000
Check rate nowon SLH's secure site
6.15% – 15.37%1$5,000 - $100,000
Check rate nowon SLH's secure site
6.87% – 35.97%*$1,000 - $50,000Visit Upgrade
8.00% – 25.00%$5,000 - $35,000
Check rate nowon SLH's secure site
4.99% – 29.99%$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%2$5,000 - $50,000Visit Citizens
15.49% – 34.49%$2,000 - $25,000Visit LendingPoint
5.99% – 35.89%$1,000 - $40,000Visit LendingClub
5.49% – 18.24%$5,000 - $75,000Visit Earnest
9.95% – 35.99%$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.