5 Reasons Self-Employed Loans Are For You

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February 20, 2019

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Are you self employed and considering loans? Here are 5 reasons to consider self-employed loans.


Raising capital for one’s business is often the most difficult part of the start-up process. Given that the vast majority of Americans start their ventures as sole proprietorships, it comes as no surprise that there are difficulties with funding. After all, one of the biggest disadvantages of this entity type is the fact that the entrepreneur is limited to their own capital. In other words, if they are unable to save enough money to invest in the venture, they may be minimizing their odds of long-term success.

Naturally, many people will consider simply starting a different type of entity in order to side-step funding concerns. For instance, joining forces with a few partners and forming a Limited Liability Company (LLC), per se, will increase the pool of money that can be utilized. Those who go as far as to create a corporation will make it even easier to get resources as they can look for shareholders. In reality, however, not everyone will want to expose themselves to things like limited control or double taxation that comes with LLCs and corporate entities. So, how can individuals who would like to remain self-employed in a sole proprietorship still acquire the necessary capital? Self-employment loans!

Over the past few years, self-employment loans have gained a lot of momentum. And rightly so. Their ability to connect the prospective business owner with willing lenders is unparalleled. In fact, one could argue that they can be the best short-term solution for capital concerns. Therefore, what would be the top five benefits of this financing method that make it so advantageous to entrepreneurs?

No Need for Bank Statements

When applying for regular loans, which would be things like car loans or mortgages, one will have to supply the lender with a never-ending list of documents. This includes but is not limited to, previous tax returns that have been signed, credit scores, income verifications like pay stubs, and much more. Oftentimes, the most concerning piece of information that people ask for is one’s personal bank statement. The reasoning behind this is the fact that a lot of the aforementioned types of loans are secured in nature. Meaning, if one fails to pay back what they owe, the lender will keep the deposit that might have been given to them. Well, self-employment loans are nowhere near as convoluted.

Although lenders will still make inquiries into one’s credit history and tax returns, they will not go as far as to analyze their banking activity. This is an important advantage that many entrepreneurs appreciate as it promotes better privacy and a much simpler process. After all, not everyone is going to be thrilled about having a third party look into all of their recent transactions.

Quick Access to Capital

As with any type of a business-based loan, its most obvious benefit boils down to the quick access to capital. When companies are starting out, the amount of money required tends to be much higher than what their normal day-to-day expenses will eventually be. This comes from things like down payments on office spaces, investments in product prototypes, heavy up-front marketing, and much more. Thus, business owners who want to have their company will have to dedicate a fair share of their net worth to simply getting it operational. For many people, however, this can present concern as they are not liquid enough to give away a large portion of their net worth.

Well, loans are an important tool that will allow them to get the necessary funding from an unrelated third party. Thus, they will retain the ability to cover unexpected costs with their own resources while the start-up expenditures would be accounted for.

Variety of Providers

In the past, the number of lenders who were willing to work with self-employed professionals was fairly low. This was due to the fact that they were skeptical about working with people who have an uneven cash flow and cannot accurately predict their earnings. Nowadays, however, due to a large number of self-employed businessmen and women, the vast majority of national lenders have opened their doors to individuals who fall within this category. Doing so allowed them to increase their client base and have a lot of interest revenue in the long run.

Credit Building Potential

Obviously, one will need to have a decent credit score in order to be given any kind of loan in the first place. The financial institutions use this as the most important indicator of the person’s ability to repay them. Thus, those who have a concerning credit history will raise red flags that make the bank hesitant about approving their loan. Oftentimes, however, lenders are willing to work with individuals who can provide enough supplemental data to compensate for a less-than-perfect credit score. This could mean that they offer more of their pay stubs or other documents that showcase liquidity. So, once they get the loan, they will be able to rebuild their credit by paying it off. Meaning, the loan could help provide the capital as well as a clear path to a higher credit score.

Retaining Control of the Business

People are often tempted to borrow money from friends and family at a lower interest rate than what traditional intermediaries would give them. Even though there are obvious money-saving perks to this alternative, they could come at a high hidden cost. For instance, a lot of individuals who partner up with friends and family will give away some of their ownership and control rights. Thus, getting a loan to start a business may impact their ability to actually run it how they would like. To avoid this and retain complete control of everything that transpires within the organization, they should look for self-employed loans!

Ultimately, the combination of easy access to capital mixed with a credit building potential is what makes self-employment loans so beneficial. Those who are interested should contact their banking institution to ask about available options. Moreover, they should set appointments to meet with other providers as they might offer them better interest rates. In the end, taking action sooner rather than later will allow people to capitalize on the high-trending economy that has helped millions of sole proprietors get lower interest rates!

Associates Home Loan of Florida can guide you through the lending process! Call us today at (866) 257-9476.

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