Acquiring funding for your enterprise can be difficult if you are self-employed. Being self-employed often means inconsistent paychecks, which makes lenders reluctant to approve you for a loan.
In addition, lenders often demand strict documentation as proof that the self-employed person will repay the loan on time. This makes getting a loan challenging, but loan for self-employed people are still obtainable. It would help if you researched where you can get a loan. Let’s look at some of the best options available for self-employed people.
Loan Options for Self-Employed People
A person with a 9 to 5 job may have difficulty getting a personal loan. But these loans are rather popular because they can use the amount for anything without restrictions. Below are some examples of loans that may be helpful to self-employed people:
Reliable online lenders offer some of the most lenient and manageable loan terms for personal loans. The borrowers can use this loan amount for various purposes, like debt consolidation, home repairs, medical bills, emergencies, and business-related issues. Although the terms may seem relaxed at first glance, look into different lenders and what they offer to ensure you apply for the one that works best for you.
Approving your credit card application is easy since you will receive a line of credit instead of a significant one-time payment. The application processes are straightforward; the lender will ask for income documentation, State-Issued ID, and check your credit score. In addition, some credit cards come with special perks such as discounts, travel perks, and other exclusive offers.
Payday loans are an excellent and quick cash fix for emergencies but aren’t long-term solutions. In addition, these loans must be paid off before your next payday and are covered by small amounts. Therefore, payday loans wouldn’t be advisable if you are looking for a big loan.
Business Loans for Self-Employed People
If you have registered your business as a sole proprietorship, then some options might be suitable for you if you are looking for cash to fund your business:
Business credit cards
Business credit cards are like personal credit cards but are linked to your business account instead of a personal account. You can only use your business credit card for expenses such as office supplies, equipment, and other business-related purchases. The interest rates for business credit cards are generally higher than personal credit cards.
Small Business Administration loans are ideal for small business owners or self-employed people. The SBA redirects the self-employed people towards a resources partner who helps them comb through their business and prepare a good pitch for lenders.
How Can a Self-Employed Person Apply for a Loan?
As a self-employed person, you are required to submit the following documentation to be eligible for a personal loan or business loan:
- Active Bank Statements
- Tax Returns
- Proof of Income
- Credit Report
Before applying, make sure you go through your credit history to ensure there are no inconsistencies or errors. Any false information could lead to the rejection of your loan application.
Getting a loan as a self-employed person may seem challenging, but with the proper knowledge and sufficient research, you can find options that suit your financial needs. However, be mindful that some lenders may charge a hefty interest rate. So, it would help if you looked into all the available options before you make any final decision before applying for a loan.