Types Of Loans For Self Employed

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When you’re employed, it’s easy to apply for a loan. Simply submit an application with the lender, provide a copy of your most recent pay stubs and you’re all set. But getting a loan as a self-employed borrower is another story since there are no pay stubs or W2 forms. Still, there are ways to secure the funds you need, but you need to understand what lenders look for and what documents they’ll accept as proof of income before applying. 

In this guide, you’ll learn about several loan options available to self-employed borrowers and how to increase your approval odds. 

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Can Self-Employed Individuals Get A Loan?

Yes, it’s possible to get a loan if you’re self-employed. However, it can be more challenging to qualify for funding with most traditional lenders, including banks and credit unions. 

Why It’s Trickier To Get A Loan if You are Self-Employed

Lenders want reassurance that borrowers can afford to repay what they borrow. It’s equally important that monthly loan payments are timely. While it’s easy to gauge if a loan payment is affordable for an applicant who’s salaried or hourly with consistent earnings, it’s trickier for self-employed individuals.

There are no pay stubs or W-2 forms to assess, so lenders may ask for bank statements to estimate earnings from the last three months. Or you may be required to provide the most recent tax returns when you apply. 

What Lenders Generally Look For

In order to prepare your application, see here what most lenders will ask you if you are applying for a long as a self-employed individual:

Income Stability

Your income should be relatively stable to have the best chance of qualifying for business financing. An occasional dip in your income isn’t necessarily a deal-breaker, but lenders prefer applicants with increasing revenues. 

Nature Of Your Self-employment

It’s also ideal if you’ve worked in the same industry for two or more years. A shorter work history in a particular sector could be a red flag to lenders and subject you to more stringent qualification criteria. 

Financial Strength Of Your Business/Source Of Income

Do you have cash reserves to smooth out income gaps or cover unexpected expenses? If not, you could be viewed as risky to the lender and receive a higher interest rate. 

Ability To Generate Sufficient Income In The Future

Are your revenues trending upward or downward? Lenders want to know that your company will be able to generate sufficient income in the future, and a continuous dip in earnings could indicate the inability to do so. 

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Read this review about Lendio, a small business loan online marketplace to access a network of lenders with one simple application.
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Business term loans are a stable way to get funding to grow your business and improve your credit. Read how to get one through Lendio.

Typical Loan Requirements For Self-Employed

Each lender has its own qualification criteria, but here’s what you’ll generally need to secure funding: 

Your Credit Score

The lender will pull your credit report and score to gauge your creditworthiness and determine if you’re a good fit for a loan. A lower credit score doesn’t mean you’ll be denied financing, but the interest rate you receive will likely be higher. 

Verification Documents

Lenders will ask you for bills under your name, or any other documents that can prove your identity or personal contact information and address. They will also require you to share your social security number.

Pay Stubs

If your client(s) remit payment through a standard payroll processing system, you may be able to access pay stubs. Print them off and provide them to the lender as proof of income if allowed. 

Bank Statements

Some lenders allow you to use bank statements as proof of income. The account you use should display consistent deposits from income earned in your business.

Profit And Loss Statements

Profit and loss statements provide a closer look at your income and expenses. If you’re spending more than what’s coming in, the lender may be reluctant to offer to finance or assess unfavorable loan terms to hedge against the risk of default. 

Personal Tax Returns *including Schedule C, Schedule SE, Form 1120S or K-1, and 1099s

Your personal tax returns reflect your earnings in the prior year. Lenders often request returns for the past two years to determine if your income is trending upward – a significant drop could indicate mounting financial issues and red a red flag. 


Secured loan products for self-employed individuals require some form of collateral. This could include a valuable item, like a car or jewelry. While it’s generally easier to get approved for a secured loan, they’re risky, and you could lose your collateral if you default on the loan agreement. 

Type of Loans For Self-employed

If you are self-employed, review the types of loans that you may qualify for:

SBA Microloans

SBA Microloans are available through SBA-approved community-based lenders. They’re backed by the SBA and cater to business owners who struggle to qualify for funding elsewhere. Loans are limited to $50,000, come with a six-year term, and can be used for most business expenses, excluding real estate acquisitions and debt repayment. 

Business Credit Cards and Lines of Credit

There are several business credit cards available to self-employed borrowers. Some offer cash back rewards, travel points and other incentives, but they’re generally reserved for consumers with excellent credit.

A business line of credit is another viable option, but you’ll typically need a few years of business experience to qualify. You can pull from a pool of funds on an as-needed basis, and you’ll only pay interest on the amount you borrow. Furthermore, you may find that the amount of credit you have access to is higher than what you’ll get with a business credit card. 

Payday Loans

Payday loans should only be used as a last resort if you need fast cash. They come with steep interest rates, sometimes well into three figures, and are often due by your next payday or within two weeks of taking out the loan. And if you’re unable to remit payment on the due date, you’ll rack up even more fees. 

Co-signed Loans

If your credit score isn’t up to par or you’re new to the business world, a co-signer could strengthen your chances of getting approved for a personal loan. While it’s not allowed by all lenders, a co-signed loan may be a viable option to secure financing with competitive terms since the lender will have reassurance that a second party is responsible for the loan if you fall behind on payments. 

Equity Financing

Consider selling a portion of your company in exchange for cash. This is known as equity financing and could be beneficial if you’re just starting out and don’t anticipate earning a hefty sum of revenue in the next few years. 

Home Equity Loans Or Cash-Out Refinances

Do you have a sizable amount of equity built up in your home? You can convert a portion of it to cash through a home equity loan or cash-out refinance, and the cost of borrowing on these loan products could be low. Still, your home is used as collateral, and you risk foreclosure if you fall behind on payments. 

Where to Get a Loan if You are Self-Employed

Ultimately, you don’t have to resort to pulling equity out of your home or spend hours searching for the perfect loan product online. Instead, you can use Lendio to explore loan options from more than 75 lenders nationwide in one sitting. You can apply for consideration in just 15 minutes without impacting your credit score, and some lenders offer funding in just 24 hours. 

To learn more, navigate to Lendio’s website to submit a simple online form to get started.

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