How to Transfer Personal Loans Into Business Loans

If you took a personal loan for your business, you may be afraid that your own assets are at stake should the business fail. You may also be wondering how to transfer a personal loan into a business loan, so the business will be responsible and not you. There are ways to make this transfer, but it may involve somewhat complicated paperwork, and maybe even legal fees, before you can transfer the loan.

Establish the business as a separate legal entity, if it isn't already. If you are a sole proprietor, you and your business are essentially one-in-the-same. Even if you transfer your personal loan to a business loan, you will be responsible for the loan. However, if you establish a LLC (limited liability corporation), S- Corp, or C-Corp, the business becomes a separate "person" in the eyes of the law, and your personal assets are generally protected. To become an LLC, S-Corp or C-Corp, you will need to file the appropriate paperwork (and in some cases, articles of incorporation). You generally need a lawyer to do this step for you.

Gather proof of business income. If your business is going to apply for a loan, it needs to have assets or income to do so, just like a person does. The bank will want to see proof, so make sure you gather all these documents.

Apply for a business loan. You can do this through the Small Business Association, a local bank or a credit union. You'll need to use the business name, provide proof of business income, and fill out the application with the information about the business (including the corporate ID number) if you want the loan to be in the business name only and not in your name.

Close on the business loan. This will involve signing papers, and in some cases, paying loan origination fees or other related costs.

Use the proceeds from the business loan to pay off your personal loan. The personal loan will thus be paid off, and the debt transferred to a business loan.