Many self-employed workers turn to personal business loans for financial assistance. As a self-employed worker, you perform business duties as an individual or sole proprietor. Similar to other business owners and employees, you need funding. Unfortunately, finding secured vs unsecured loans is not as easy as it sounds. This is especially true because the requirements vary between the types of personal business loans, including those for self-employed workers like yourself. Read on to discover the personal business loan requirements for the self-employed.
2 Years Of Income Documentation
To obtain a personal business loan for the self-employed, you must provide lenders with 2 years of income documentation. In this way, self-employed borrowers are not very different from other business loan applicants. However, self-employed borrowers typically do not have pay stubs to use as income documentation. Instead, lenders accept tax returns as proof. Or, you can show proof of household income to supplement your personal income. Gather your tax returns from the past 2 years to qualify for a personal business loan.
As with most loans, lenders require your credit history before approving you for a personal business loan. Self-employed or not, credit matters during the loan application process. Many borrowers refrain from applying for personal business loans when they have bad credit. Fortunately, there are less strict loan options for obtaining the funding you need. Most online lenders accept self-employed applicants even without strong credit scores. If you were unable to get approved by your bank due to your poor credit score, apply for a personal business loan online.
Reason For Borrowing
Lenders also require explanation of why need a personal business loan and what you plan to do with the finances. If you are a new owner applying to private business loans, you will come across a section dedicated to this topic on the online form. Select the business option to give lenders an idea of what you plan to spend the money on. If you are applying in-person, you may be asked to provide a business plan. After all, lenders want to ensure that they can get their money back at the end of your term. In order to receive the money you need, you must provide lenders with your reason for borrowing in the first place.
Self-employed workers need to submit a Schedule C statement to get a personal business loan as well. If you run a single member LLC or a sole proprietorship, you may be familiar with the Schedule C. This statement assists lenders in determining how much profit you actually take home from your business. It portrays how much you make and how much you lose. With this knowledge, lenders can make an informed decision on whether or not they can trust you to repay them. For this reason, they demand it during the application process.
Proof Of Legal Business
Lastly, lenders require proof of legal business to grant you a personal business loan. Similar to how most business owners prefer not to partner with other businesses who function illegally, lenders do not wish to partake in doing business with fraudulent companies. Hence, they request evidence of legal operation. Such evidence can consist of state registration and a business license. Do not give lenders a reason to deny you a personal business loan. Rather, provide them with proof that you are a legally self-employed worker. Then, you have a better chance of obtaining a personal business loan.
Financial assistance does not always come easy, especially for the self-employed. Fortunately, you can receive a personal business loan if you can meet the requirements. Lenders request 2 years’ worth of income documentation, which can be provided via tax returns. You must also supply lenders with your credit history. Most lenders ask for a clear document stating the money’s purpose. Submit a schedule C to give lenders an idea of your profit, loss ratio. Finally, gather evidence that you run your business legally and submit it to the lender. Meet these personal business loan requirements to receive the funding you need as a self-employed worker.