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Seize New Opportunities With These 5 Business Loans for the Self-Employed


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As a busy sole proprietor, you need to save time by targeting your financing efforts toward finding the best business loans for the self-employed, though finding the most appropriate options can be a bit of a challenge. Despite this, many are turning toward self-employment opportunities.

Over the past few years, self-employment rates have grown across the U.S. Construction makes up the largest piece of the self-employment sector, accounting for 16.5% of all self-employed workers, with the professional, sciences, and technical services industry following closely behind with 13.5%. Many freelancers are also delivering food and offering ride services.

Finances for the self-employed have always been a bit of a challenge. You need to juggle how much you’ll owe for taxes every quarter, and getting financing for your business can be its own challenge.

As you’re looking for lending opportunities, keep in mind lenders will want to see a consistent source of income, along with a strong credit score, before they consider offering you the funding (let alone the total) that you need.

In this blog, we’ll review the top 5 business loans for freelancers, how you can get funding, and what you should keep in mind with financing.


Did you know…

business loans for freelancers

Source: Federal Reserve Bank of St. Louis


The Top 5 Business Loans for the Self-Employed


1. Personal Loans

Personal loans are a flexible option if you’re looking for financial assistance. While personal loans aren’t considered business loans, you can use them for business purposes. These loans are unsecured, which means you don’t need to provide collateral. Many banks and online lenders offer personal loans, and they often come with competitive interest rates and repayment terms.

Since these loans are based on your creditworthiness, having a good credit score and stable income can increase your chances of approval.


2. Business Line of Credit

Business lines of credit provide you with access to funds as you need them, up to a pre-approved limit. One of the major advantages of a line of credit is how interest is only charged on the amount you use. A business line of credit is a fantastic option to cover unexpected expenses or to invest in your business’s growth.

As a sole proprietorship, you can use a business line of credit to invest in marketing campaigns, purchase essential equipment, hire subcontractors or support staff, and more. You can also use your line of credit to attend conferences, giving you a cutting edge in your niche.


3. Invoice Factoring

Struggling with unpaid invoices from clients? Invoice factoring might be one solution. This financing option allows you to sell your outstanding invoices to a factoring company at a discounted rate, providing you with immediate cash flow.

The factoring company then collects the invoice amount from your client. This is especially helpful for freelancers with long payment terms or slow-paying clients.

With invoice factoring, you’re in a better position to manage day-to-day costs and operations. With freed up cash in hand, you can pay staff and subcontractors, purchase the equipment or software you need, and better focus on your core business.


4. Equipment Financing

Do you need expensive equipment to do your job? Equipment financing may be an option for you. Lenders provide financing specifically for purchasing or leasing equipment, using the equipment itself as collateral.

This can help to reduce upfront costs and spread the expense over time, making this a prime choice for self-employed individuals working in landscaping or construction.


Struggling to Find Loans as a Self-Employed Business Owner?

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5. SBA Microloans

Another popular loan option for self-employed business owners are Small Business Administration (SBA) microloans. These loan amounts typically range from $500 to $50,000, with low interest rates and flexible repayment terms.

To qualify for an SBA loan, you’ll need a solid business plan and a good credit history. (You may also need to provide collateral for your intermediary.) As a competitive, business-friendly business loan for self-employed borrowers, microloans can be used to improve your business.

Your microloan can cover:

  • Inventory
  • Supplies
  • Machinery
  • Equipment
  • Fixtures
  • Working capital


How to Get a Business Loan When You’re Self-Employed

1. Get your financial documents together

Compile your financial records, such as tax returns, bank statements, and profit and loss statements. Lenders typically require at least two years of documentation to evaluate your financial stability and repayment ability.

Make sure you have all of your income documentation together, including your federal tax returns for the last two years (including both Schedules C and SE), bank statements, and your 1099s from the last two years.


2. Research financing options

Explore your financing options, including those we’ve listed above. Create a spreadsheet to compare interest rates, terms, and eligibility requirements to identify the best option for your business.

When looking at small business loans for self-employed workers, you should prioritize:

  • Competitive interest rates: Competitive interest rates reduce the costs you incur while borrowing.
  • Flexible repayment terms: When considering repayment terms, pay attention to what aligns with fluctuations in your income. This can help make paying off self-employed business loans a bit easier.
  • Achievable eligibility criteria: Check for credit score requirements, income stability, and what documentation you’ll need.
  • Fees: Evaluate any associated fees, such as origination, prepayment, or late payment fees, as they can impact the overall cost of the loan.


3. Choose the right lender

Select a lender that caters to freelancers and offers flexible financing products. Alternative lenders, credit unions, and community banks may have more lenient approval criteria than traditional banks. Additionally, consider lenders that specialize in your industry or have experience working with freelancers.


4. Negotiate your financing terms

When negotiating the financing terms, focus on securing favorable interest rates, repayment terms, and any fees associated with the financing. A well-negotiated agreement can save you money and make repayment more manageable.


What to Keep in Mind When You Start With Financing

Your information’s mapped and you’re ready to make a decision. As you take that first step toward getting the money you need for your business to succeed, we recommend keeping your budget in mind.

Keep tabs on:

  • Saving money for future, unexpected costs
  • Split up your earnings and put a portion into a high-interest savings account every month
  • Paying taxes quarterly helps you stagger out payments owed to the government


Take the First Step Toward Financing for Your Business With Credibly

Self-employed and looking for a business loan?

We’re here to help.

As the go-to business financing provider for freelancers, we’ve provided over $2 billion in financing to small businesses just like yours.

We’ve helped over 30,000 businesses achieve their goals, and we’re ready to help you.

Speak with a financing expert today.

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Plan for the future with Credibly.

We recognize the unique financial needs of your business. Although we don’t provide mezzanine financing, we’re equipped to help you assess if this is the right path for you.

Our commitment is to understand your business’s potential beyond just the numbers. We’re here to offer insights and guidance—not just financing.
If you’re considering your next financial move and wondering if mezzanine financing fits your growth strategy, let’s discuss your options.

With experience supporting over 30,000 businesses, we’re prepared to help you make an informed decision.

Begin exploring your financing possibilities with Credibly today

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