Personal Loans vs Business Loans: What’s Best for Self-Employed South Africans
Being your own boss in South Africa sounds like living the dream, right? No clocking in, no Monday morning standup, no awkward small talk in the office kitchen - just freedom, flexibility, and the hustle you call your own.
But sadly, self-employment isn’t all cappuccinos and creativity. When you say goodbye to a salary, you also say goodbye to dependable income, and that can have a serious effect on your finances. Whether it’s a dry spell in client work, urgent equipment repairs, or the chance to finally expand, sometimes you just need access to funds. And that’s when the big question hits: should you go for a personal loan or a business loan?
Personal Loans: The Quick(er) Fix
If you’re a freelancer, contractor, or gig worker with no registered business, a personal loan is usually the faster route. These loans are based on your personal credit profile, not your business turnover, which can be a lifesaver if your income is irregular or your business isn’tregistered.
Why self-employed folks often go this route:
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It’s quicker to apply, especially if you already bank with the lender.
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There are fewer hoops to jump through. You don’t need a business plan or company registration docs to apply.
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You can use the money for anything - new laptop? Emergency dental work? Slow season rent? It’s all good.
But heads-up: lenders still want proof that you can repay the loan. You’ll need to show consistent income with things like bank statements, invoices, or tax returns. If your income is super up-and-down, you might get offered less favourable terms (read: higher interest).
Unfamiliar with personal loan terminology? Read ourpersonal loan glossary and get familar now.
Know the documents you need before you apply
Make sure to check out what documents banks accept as proof of freelance income in 2025 before you start the application process. This might include 6-month bank statements, SARS tax letters, or a combo of signed contracts and payslips from gigs.
Business Loans: Built for Bigger Moves
If you’re a registered business (even as a sole proprietor) and you’re looking to scale, a business loan might be a better fit. These loans are typically larger, and they're designed for… well, business stuff: expanding your team, buying stock, launching a new product line, or fitting out a new workspace.
Here’s why it works for small businesses:
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You could get access to higher loan amounts.
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A business loan may come with business support or perks (like mentorship or tax breaks).
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It helps keep your personal and business finances separate.
Of course, there’s a catch. A business loan may get you more, but it is also going to cost you more in terms of time and paperwork. Lenders usually want to see a business plan, financial forecasts, and proof of revenue. If you’re a one-person show or side-hustler, this process might feel like overkill.
If your business has been trading for 6 to 12 months and has an annual turnover of R1 million or more, you could be eligible for small-business funding. Hippo’s Business Loans comparison tool offers finance options from banks and alternative funding providers.
So, Which Loan Works for You?
|
Scenario |
Best Loan option |
|
You need quick cash to get through a dry spell |
Personal loan |
|
You’re a freelancer with no registered business |
Personal loan |
|
You run a registered business and need to hire an employee |
Business loan |
|
You want to keep your business and personal finances completely separate |
Business loan |
|
You don’t have the time to fill in a long application or get statements from your accountant |
Personal loan |
The right loan is a personal decision:
As helpful as this table is, remember that there’s no one-size-fits-all answer here. Whether you’re designing logos in your lounge or running a boutique bakery in Cape Town, the right loan comes down to your setup, your needs, and how quickly you need the funds.
The importance of paying back your loan
Just remember that paying back a loan is a serious responsibility, regardless of whether it’s a business or personal loan. Businesses and individuals can be blacklisted for defaulting on loans - so plan ahead, be diligent in your repayments and stay on track!
Compare loans quickly and easily
Need a hand with your research? Whether you're after a personal loan or a business loan, you can compare loans for self-employed South Africans on hippo.co.za in just a few clicks.
See offers from trusted lenders side-by-side and make a smart choice without hopping between a dozen different tabs.
Click. Compare. Choose the loan that works for you.
Your future self (and your cash flow) will thank you.
This article is for informational purposes only and should not be construed as financial advice.
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