Are you struggling to get the loan you want as a self-employed person? Unfortunately, you're not alone. Whether looking at debt consolidation, investing in your company, or building up a buffer for unforeseen business expenses, getting a loan often seems impossible if you are self-employed. This is especially true in times of economic uncertainty. The global economic situation makes it increasingly difficult for self-employed individuals and entrepreneurs to qualify for traditional loans. Banks are more cautious when granting loans these days. In this context, the question arises: How can business owners obtain the necessary funds to protect themselves from financial bottlenecks?
The good news is that light is at the end of the tunnel.
This article discusses the different types of loans available to the self-employed and what you need to know about applying for a small business loan, specific credit requirements to tips for a successful loan approval.
Can you get a loan as a self-employed person?
When self-employed individuals look for personal loans, they are typically faced with the challenge that banks and financial institutions are more sceptical of them than permanent employees. Nevertheless, there are also loan options for the self-employed, tailored to their needs and companies. These include working capital loans, investment loans, or other installment loans for start-ups, i.e., loans for self-employed individuals who have been active for less than a year. These loans are often designed to finance ongoing operations and can be used, for example, to purchase goods and raw materials or to bridge short-term financing gaps.
Which is better? Personal loan or business loan?
The decision between personal and business loans depends heavily on your intended use, financial situation and employment status.
- Personal loans are only available to private individuals. They are ideal for financing vacation trips or larger private spending such as car purchases or home improvements, for which there are even separate loans. They offer flexible repayment options in monthly installments and do not require any additional collateral. Credit agencies such as Schufa in Germany usually carry out checks to determine your credit score. A consistent income always helps your eligibility, but your credit history and ongoing student loans are also considered.
- This contrasts with business loans. They are taken out specifically for professional purposes and are primarily of interest to small business owners, sole proprietors and freelancers. These loans consider the applicant's private creditworthiness and the company's financial situation. The challenge when applying here often lies in the lack of security of a regular income that oftentimes comes with self-employment. This makes self-employed individuals appear more risky to lenders. In addition, entrepreneurs in the start-up phase or sectors with higher insolvency rates must expect greater difficulties as banks consider the risk of a loan default more likely.
Personal loans are suitable for personal purchases and consumer wishes, while business loans are the better choice for business investments and expansion. You should also be aware that although qualifying for a business loan can be harder, they offer more favorable conditions and tax advantages. Your decision for one loan or another should, therefore, be based on your individual financial needs and goals.
Which bank offers loans to the self-employed?
A loan allows you to invest directly in your own business. However, not every bank is willing to grant loans to the self-employed, which makes it difficult to find financing options. Self-employed individuals and freelancers face the challenge of proving their net earnings and a consistent income. It can be difficult to meet the required credit conditions, especially in the start-up phase or with fluctuating income.
May we introduce you to Silvr?
With our 40-strong team, we have already issued over €100 million in loans, proving our capacity and commitment to helping entrepreneurs on their path to success. Our short-term business loans allow you to optimize your cash flow — without risking capital or personal collateral! And that's not all: with the possibility of refinancing after 40% of the current loan has been repaid, we demonstrate that we value a long-term partnership with you.
What is the alternative to a bank loan for the self-employed?
In addition to traditional loans, various alternatives are suitable for self-employed individuals in all professions. These can be government loans, for example, which may offer more favorable conditions but are also subject to specific requirements. Business credit card advances are another option but can come with costly conditions.
What do we do differently as an online-lender?
Our financing alternative scores point to lower interest rates and more flexible repayment terms than a traditional loan from your bank. Its uncomplicated application process brings considerable benefits.
“Silvr also means minimal effort. I want to avoid having 14 conversations and reading through 14 contracts. Compared to my previous financing experiences, I found everything related to Silvr financing to be extremely straightforward, clear, and easy to understand.”
— Michael Holzner, Co-Founder of femtasy
Differences in lending: tradespeople vs. freelancers
Tradespeople in, for example, agriculture and forestry can apply for loans as private individuals or companies. A steady and sufficient income, affordable monthly expenses, a positive credit rating, and, if applicable, collateral are often decisive for a successful loan application. However, not only do credit requirements play an important role, but so does the type of self-employed activity.
Tradespeople who have to register a business to carry out their activity face the challenge of banks and credit institutions requiring comprehensive documentation of their business activities. This includes personal details, business plans, balance sheets, profit and loss accounts, and proof of income continuity. The APR and the conditions for a favorable loan depend heavily on the business's creditworthiness and the applicant's creditworthiness.
On the other hand, freelancers who generally do not require a trade license and often work in creative, consulting or freelance professions sometimes have an easier time getting a cash advance. Although their creditworthiness is also checked based on personal details and credit history, the assessment of their income is less strict, as their self-employment income is largely not subject to highly fluctuating turnover. However, freelancers must submit their income tax returns to prove their income. Loan conditions can mostly be more favorable for freelancers if they can show a stable and verifiable source of income.
The requirements and conditions for loans can differ considerably depending on whether you are a tradesperson or a freelancer. While tradespeople typically have to provide verifiable business income, freelancers focus on personal creditworthiness and income.
Loan requirements that need to be considered
Before you take the first step to applying for a loan as a self-employed person, there are a few basic requirements that you should consider. First and foremost is your credit report — in other words, your credit rating. Keep an eye on your debt-to-income ratio, as a good credit rating is often decisive for granting a loan. It gives banks certainty about your ability to manage monthly payments. Collateral also plays an important role. It serves as security for the banks if you, as the borrower, cannot meet the payment obligations agreed in the loan agreement. Proof of your turnover is also essential. Banks want to see that your company is economically viable and has sufficient revenue to justify granting the loan. Finally, the sector in which you operate also influences your risk profile.
What makes Silvr special
We specifically support small and medium-sized companies in Germany and France. In all sectors and industries!
Are you self-employed in the hospitality industry? Or work as a management consultant? No matter your profession, you only need a minimum turnover of €7,000 for each of the last three months to qualify for financing. In addition, your company must have been operating for at least six months. An outstanding feature of Silvr is that neither company shares nor personal collateral is required. Nevertheless, our financial experts will accompany you personally along the way.
“Unlike many other providers, Silvr offers direct contact with a dedicated person, which is invaluable.”
— Karsten Dehler, Head of Global Sales at Mandrops
What documents do you need for self-employed loans?
This is probably one of the most frequently asked questions. When self-employed workers apply for a loan, various documents are required to give the lender a more profound understanding of their company's financial situation and personal finances. These include:
- Current business analysis (BWA in Germany): This provides an up-to-date overview of the company's financial situation. Banks and other financial service providers use this document to assess the current earnings.
- Profit and loss statement (P&L): This shows the company's income and expenditure over a specific period and is used to assess profitability.
- Tax statements: These serve as proof of income and are evidence of the applicant's financial integrity.
- Sum and balance lists (SuSa in Germany): These provide detailed information on all business transactions and are fundamental for assessing the quality of accounting.
- Turnover and revenue forecasts: These forecasts help lenders to assess future business potential.
- Profitability calculations show how and when planned investments will contribute to the company's success.
- Meaningful business plan: This provides information about the business idea, market analyses, strategies, and financial forecasts.
- List of liabilities and receivables (accounts payable and accounts receivable list): This provides an insight into the company's liquidity and payment history.
- Collateral: Information on possible collateral such as real estate, vehicles, or guarantees that can secure the loan.
- The current extract from the commercial register provides evidence of the company's legal form and authorized representatives.
- Partnership agreement: This is particularly relevant for partnerships and corporations and provides information about the company structure.
In comparison, the list of documents to be submitted to Silvr is much smaller, making the process easier for entrepreneurs. For a loan application under €50,000, Silvr only requires:
- the most recent annual financial statements or the current BWA and SuSa,
- the income statement (for sole proprietors)
- as well as the bank connection of all relevant business accounts (or bank statements)
How can the documents be submitted for an online loan for the self-employed?
A simple and fast process is an absolute priority when applying for a loan online. With us, applying for a loan without collateral takes just three steps.
- Create a Silvr account: You can store company information and financial documents on the platform and connect relevant bank accounts.
- You receive a loan offer: We'll send you a customized business loan offer within 48 hours.
- Use your cash advance: You will receive your loan amount on the next working day at the bank after signing the contract.
What should self-employed people consider when comparing loans?
When looking for a loan, you should consider various aspects to make the best decision for your business and find the appropriate financing solution.
- Flexible repayment options and unscheduled repayments
As the income of self-employed individuals often fluctuates, loans with the option of adjusting repayment installments or early repayment without additional costs are particularly advantageous. This allows you to repay more in financially good times and reduce the burden in weaker sales phases. Special repayment rights are also useful in this context. This option allows you to make additional payments if your financial situation permits. It can also reduce the total interest charge and shorten the loan term.
- Fee transparency
Ensure you have a full breakdown of all fees associated with the loan, including processing fees, account management fees, and any early repayment penalties. A transparent presentation helps you realistically assess the loan's total cost and effectively compare offers.
With Silvr, you only pay a single financing fee!
Find out more now in our FAQs.
- Intended use
Many loan offers are tied to specific purposes.
With Silvr, you can use your business loan in the way that best suits your business strategy. Finance invoices, inventory, growth, working capital, or all at once.
- Customizable credit line
Some financial service providers offer loans with a flexible line of credit that adapts to the changing financial needs of the self-employed. This can be particularly useful for responding to unforeseen expenses or investment opportunities.
- Specialized lenders
Offers from lenders who specialize in the self-employed or have experience with this target group may be a good fit for you. These providers often understand the specific challenges and needs of self-employed borrowers better and can offer tailor-made financing solutions.
- Comparison services
Online comparison portals and loan calculators can greatly help quickly and efficiently compare the conditions of different loan offers. However, the individual needs of the self-employed person should always be considered by finance experts.
Tips to successfully apply for a business loan
Thorough preparation is the be-all and end-all when applying for a loan. Here are some essential tips for a successful loan application.
- Preparing the application form
Fill out the application form for the commercial loan in detail and accurately. This is the first step and should be approached carefully.
- Clear objective
Be clear about why you require the loan and how you want to use the funds. A coherent plan will improve your chances of being approved.
- Clear presentation
Present your information, for example, in Excel spreadsheets rather than PDFs, and name your files appropriately to avoid confusion.
- Strong business plan and financial forecast
Develop a convincing business plan and cash flow forecast to demonstrate the viability of your business.
- Choosing the right lender
Not all lenders are the same. Choose a lender with experience in your industry or one that offers more flexible loan terms, such as installment breaks. If you are looking for a quick financing option, you may also be interested in a loan with instant approval.
- Timing of the request
The appropriate time to apply is crucial. Apply for the loan when your business plans have been finalized, and you are not in bad credit or in a financial emergency.
- Comprehensive documentation
Be prepared to provide detailed documentation, including historical financial reports and evidence of your product's marketability.
- Clear use of funds
Determine exactly what you want the loan for and draw up a watertight plan for your business growth.
- Financial records
Keep accurate and up-to-date financial records to support your net earnings.
- Be transparent about financial problems
Be prepared to explain any financial issues in your application.
By following these tips and preparing your documents meticulously, you'll increase your chances of getting the right loan. Whether an instant loan or a small loan for the self-employed, careful planning and presentation of your business finances are the keys to success.
Conclusion: Silvr as a partner for the self-employed
Self-employment not only means independence and freedom but also responsibility, especially regarding financial aspects such as taking out a loan. With the information gathered here, we hope to make it easier for you to decide when choosing a loan to support your professional and personal development.
Silvr understands the unique challenges faced by self-employed individuals and offers a solution that is both flexible and accessible. With Silvr, you can get the financial support you need to grow and succeed — quickly and easily.
