Is It Possible To Get A Loan When You Are Self Employed?

Sharing is caring!

With the ever-changing economics, the younger generation, 20-35 years of age, would prefer to own their own businesses instead of seeking self-employment. The rate of unemployment among youths is the major factor behind the new global attitudes among young adults. All ambitious business owners naturally want to expand their businesses. If you are a novice to the world of self-employment, you are certainly bound to discover that making profits can be very difficult. Over time, your business may require that you pay its bills and debts.

A loan can automatically help your business startup in more ways than just one. The routine that a bank lender follows when loaning is very complicated. Banks only consider the individuals with a steady paycheck. Employed persons enjoy a steady income and are the most likely repay loans on time. This is because an employed individual has fewer responsibilities when compared to a self-employed individual. In addition, lenders pessimistically deny loans to businesses that may fail or succeed. However, the fact should not discourage you to apply for a loan. Some lenders work with self-employed individuals if you can convince them to put their trust in you.

Personal Self Employed Loans

If you want to borrow a small amount from the bank, it is advisable to take it as a personal loan. These types of loans do not carry any collateral. This means that these types of loans are not secured against property. If you have a bad credit history, it might be difficult to get approved. A bad credit score greatly reduces your chances loan approval. Furthermore, a bad credit score can cause more harm to your starting business than good. The best way to avoid a bad credit score is to always have a payment plan before taking any loans. Delaying or defaulting your debt repayment altogether is a sure way to earn bad credit scores.

Always Remember to Show Your Business Income

Just as the modern job market requires you to have at least two years of experience in the field, so do banks when issuing self employed loans. Acquiring a self-employed loan may be difficult. It is very common for lenders to ask you to show the income of your business in the last two years. They do this to determine if you can afford to repay the loan or not. Additionally, they would also like to learn more about your business. If you are just starting your business, the deal will see very unfair. However, you should understand that no one can believe in you unless you prove yourself. After all, it is only business.

Build Your Cash Reserves

It is advisable to have cash set aside before starting your own business. This cash will come in handy when the business requires financial input to keep it afloat. This will also communicate to the lender that you are capable of paying off your debts in case your business fails.

Author Bio: Adrian Rubin is a climate change advocate and freelance writer.

Sharing is caring!

Speak Your Mind