Loans for Self-Employed People

In today’s world, many people consider themselves self-employed. If that’s the case for you, then you know that running your own business can be a lot of work. There are many options available to people who fall into this category to help them grow their businesses. In this article, we’ll look at different loan options you can qualify for as a self-employed person.

Being self-employed comes with many uncertainties when it comes to money and in today’s economy, it’s essential to have a strong financial foundation. On the bright side, there are many different loan types designed to help self-employed people on their journey to start or grow their businesses.

Depending if you need help with equipment purchases, cover start-up costs, or expand there are various business loan offers that can provide the funding you need. But if you don’t need money for this type of purchase there are also personal loans available to help with unexpected expenses. You don’t need collateral or the best credit score to qualify, so don’t overlook this option.

Do Lenders Make Loans Available to Self-Employed People?

If you are self-employed and need money to finance a certain project, but looking at your option gives you a picture that getting needed financing seems highly unlikely, we have an answer for your troubles. While loans for self-employed people are not easiest to find there are many lenders offering them and all it takes is a bit of research. There are several types you can get and each has its own benefits and drawbacks.

First, you should think about what exactly you need money for. Determining this will give you a clear picture of what loan type is most suitable. Your choices are almost endless with lenders offering business loans, auto loans, home equity loans, or personal loans.

What Documents Must a Self-Employed Person Provide to Get a Loan?

The whole application process isn’t that hard but be sure to bring the necessary documents. The most important one you’ll need to provide is your business plan. This document should outline your company’s goals and strategies, as well as give an idea of its financial situation. Other important documents you need to have on hand include of course proof of identity like an ID card or driver’s license, your taxes, profit and loss statements, and employment contracts.

What Loan Options Are Available to Self-Employed People?

As we already talked about different loans that are available to self-employed people. Based on your needs and goals but also on the type you can and should get, look at the options available. Here we will discuss the 4 most common types borrowers go for.

Personal Loans

Definitely, the more popular choice for most people is getting a personal loan from a bank or credit union. Personal loans for self-employed tend to have good interest rates that can even be negotiated and longer terms than other types. All of this makes them a good option if you need money quickly to cover some unexpected expenses. To be able to qualify you need to have a relatively good credit score so just keep that in mind.

Personal loans are available from banks and other lenders. They are intended for people who have regular income and the amount you can get ranges from $5,000 to $50,000.

Business Loans

If you want to take out a loan to finance a certain business project or venture, the best fit for you may be business loans. As the name implies you can use them to help you finance the startup costs or other business expenses but not for covering everyday expenses and debt consolidation.

Depending on the size of your business, you may be even eligible to qualify for a small business loan. These loans are usually available from private lenders, though some banks and credit unions. The downside is that they are usually more expensive than personal loans, but they may give you lower interest rates and shorter terms if that is something you are looking for. The obvious plus is that you can get more funding this way than by taking out a personal loan.

Many lenders, such as banks and online lenders offer business loans no matter the size of your business. The amount of money can range anywhere from $10,000 to $500,000.

Guarantor Loans

Another type of loan for self-employment is a guarantor loan. They provide the needed funds for a self-employed person in exchange for their guarantee that the loans will be repaid. The guarantor for this loan must have good credit and be able to provide collateral if the loan is not repaid on time.

If you think this loan type is a good fit for you, we suggest you contact a bank to get further information on their offer.

Government Loans

Government loans are some of the most popular loans for self-employed individuals. These loans can be used for many different purposes such as starting a business, purchasing a home, financing a small business, or as a personal or student loan. To be even able to qualify for government-offered loans you must meet certain criteria and the whole process is significantly longer and harder than with other loans we talked about. In most cases, you need to have a really good credit history and a good income level to cover the expenses. For these loans, you usually apply through your bank or other lenders.

If you need more of an instant loan for self-employed, we suggest you skip government loans and look into personal loans because they need less time to be issued. In case you are looking into loans for self-employed with bad credit, know your options are limited but you still may be able to get a loan you desire with slightly higher interest rates.

Like always if you’re not sure if taking out a loan is the right option for you, we suggest you speak with a financial advisor.

Is It More Difficult to Get a Loan If You’re Self-Employed?

There are a few things to think about if you’re looking to get a loan for self-employment. First and foremost, the type of loan you will be able to qualify for will differ depending on your business model and credit score. Secondly, the amount of money borrowers can take out as well as their interest fees and loan terms will depend on their individual situation. Lastly, borrowers may have to meet additional requirements and provide documentation that supports their income. The important thing to mention is that there are no doc loans for self-employed that do not require income verification in the same way as more traditional lenders do.

When it comes to actually applying and getting a loan, yes, it can be harder to achieve this if you are self-employed. Many lenders who offer loans just don’t want to work with self-employed individuals. But don’t get discouraged by all of this, while it is harder to get a loan it’s not impossible and you still have plenty of options to check out and find a good deal for yourself. For example, lenders often seek additional documentation from self-employed individuals but there are also no doc loans, same goes for a credit score whereas some lenders offer loans for self-employed no credit check.

Bottom Line

Loans for self-employed individuals can come in many forms and for different purposes. The actual loan type you can take out will depend on your personal situation. While we cannot tell you what to do, we gave you a general idea of how to get a loan for a self-employed individual and what all of the different loans actually mean.

We hope this helped you evaluate your options and find the best loan for your needs. If all of this is still a bit unclear to you, or you are just unsure if is this a good loan type for you, we recommend reaching out to a financial advisor and going through some questions you might have. This will help you get an even clearer picture and determine if this is a good choice for you or not.