When you run your own business, you might have some benefits over people who work for companies. Running your own business makes you self-employed, though, which can also present challenges with specific things. One challenge you might face when self-employed is getting a loan. Can you get a loan if you are self-employed? You can, but it might be more challenging. Here are several things to know if you need a loan in this situation.
The Main Challenge With Loans for Self-Employed Individuals
The main challenge that self-employed individuals face when applying for loans is proving their income. People who work for companies receive paychecks regularly for their income. These individuals can present their pay stubs to show their income. A pay stub is the ideal way to prove income. The downside to self-employment is that you probably do not receive paychecks and pay stubs, causing difficulties proving you earn money. If you cannot prove you have an income, a lender might turn down your loan request, assuming the risk is too high.
The Options You Can Choose
If you are in this situation, you can turn to loans that do not require pay stubs. One example is a self-employed bank statement loan. This loan type might not be available through all lenders, but some lenders offer them. When you apply for a bank statement loan, the lender lets you prove your income by turning in your recent bank statements. Your bank statements show your inflow and outflow of cash, and they can prove that you have plenty of money to repay the loan if the lender approves it.
Tips for Getting Approved for Loans When Self-Employed
Borrowing money is necessary from time to time. If you are self-employed, you can use your bank statements to get loans. Another option is to work on your credit. If you have an excellent credit score, lenders might be more willing to offer you loans, even if you do not have pay stubs. Improving your financial situation by paying off debts is another great way to qualify for more loan types when you need to borrow money.
If you would like to borrow money through the form of a loan, you might want to consider applying for a self-employed bank statement loan. Lenders that offer these loans base their loan decisions on your flow of cash, which you can prove by submitting your bank statements.
For more information, contact a loan provider in your area, such as Blake Mortgage.
Share30 September 2021
When I began my first business selling sports equipment locally, I knew the sports-world well, and I knew how to run a business. One thing I did not know a lot about was the financial world. I had never applied for a loan in my life other than when I financed my car with the dealership in-house financing. My first application at a large bank was denied. I began looking into my other options, and I found that there were more lenders for new businesses than I realized. I applied at local credit unions, local banks, and other business lending services. I was able to secure more funding than I even expected, and my credit is just average. I created this blog to help other new business owners realize that there is funding out there. You just have to find it and apply! Don't give up on your dream.