At a Glance

Being an independent contractor often comes with its own set of challenges, especially when it comes to obtaining financing. Unlike traditional employees, independent contractors are not employed by a single company and typically work on a project-by-project basis. This can make it difficult for them to meet the strict requirements that most lenders have in place for loan eligibility.

However, that does not mean that independent contractors are completely out of luck when it comes to getting a loan. There are still options available that cater specifically to their unique circumstances. Let’s explore some of the loans and financing options available to 1099 workers.

In this article, you’ll learn:

What is an independent contractor loan?

An independent contractor loan is a type of loan specifically designed for individuals who work as independent contractors. These loans provide financial assistance to independent contractors who may not have a steady income or traditional employment.

Can any independent contractor get a personal loan?

While personal loans are available to independent contractors, eligibility criteria may vary depending on the lender. Some lenders may require a minimum income level or a certain credit score. It is important to research and compare different lenders to find one that offers loans to independent contractors.

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How to prove an income as an independent contractor?

To provide proof of income for loan applications, you can provide documentation such as bank statements, invoices, contracts, or tax returns. These documents help demonstrate your earning potential and stability as an independent contractor.

Why should an independent contractor get a personal loan?

There are several reasons why an independent contractor might consider getting a personal loan. These reasons may include covering business expenses, managing cash flow during slow periods, investing in equipment or training, or personal financial needs.

What minimum credit score is required for getting a loan as an independent contractor?

The minimum credit score required for obtaining a loan as an independent contractor may vary depending on the lender. Generally, a credit score of 600 or higher is considered good enough to qualify for a personal loan. However, each lender has its criteria, so it is best to check with the specific lender for their requirements.

Things to consider before taking out a personal loan

Before taking out a personal loan, independent contractors should consider a few factors:

1. Income not guaranteed

As an independent contractor, your income may fluctuate. It is important to assess whether you can afford the loan payments during periods of lower income.

2. Paying business expenses from your pocket

Independent contractors often have to cover business expenses themselves. It is essential to calculate the total cost of the loan, including interest, and ensure it aligns with your business’s financial health.

3. No benefit plan

Unlike traditional employees, independent contractors do not have access to benefits such as health insurance or retirement plans. This should be factored into your financial planning.

4. Your job security

Consider the stability of your industry and the demand for your services. If your work is inconsistent or uncertain, taking on additional debt may not be the best idea.

How to get a loan for a 1099 income?

Getting a loan as an independent contractor can be slightly more challenging than getting a loan as an employee, but it is still possible. Here are some steps you can take to increase your chances of getting a loan with a 1099 income:

  1. Maintain a good credit score: Lenders often consider credit scores when deciding whether to approve a loan. Make sure your credit score is in good shape by paying your bills on time and keeping your credit utilization low.
  2. Provide proof of income: As an independent contractor, you may not have a traditional paycheck to show as proof of income. Instead, you can provide bank statements, tax returns, or invoices to demonstrate your earnings. It’s important to have documentation that shows consistent income over some time.
  3. Build a strong work history: Lenders may also consider your work history and experience as an independent contractor. Having a solid track record of consistent work can help you demonstrate your ability to repay a loan.
  4. Consider a cosigner: If you have a lower credit score or limited income history, you may want to consider having a cosigner on your loan application. A cosigner with a strong credit history can increase your chances of getting approved and may even help you secure a lower interest rate.
  5. Shop around: Different lenders have different requirements and criteria for approving loans. It’s a good idea to compare loan options from multiple lenders to find one that suits your needs and offers favorable terms.

How do independent contractors get personal loans?

  1. Research lenders: Look for lenders that offer personal loans to independent contractors. Some lenders specialize in working with self-employed individuals and may have more flexible requirements.
  2. Gather documentation: Prepare the necessary documentation to prove your income as an independent contractor. This may include bank statements, tax returns, invoices, or contracts that show your earnings and consistent work history.
  3. Check your credit score: Review your credit score and address any issues that may negatively impact your loan application. Aim for a good credit score to increase your chances of approval and potentially secure better loan terms.
  4. Compare loan options: Shop around and compare loan options from different lenders. Consider factors such as interest rates, loan amounts, repayment terms, and any fees associated with the loan. Choose a loan that best fits your financial needs and offers favorable terms.
  5. Apply for the loan: Once you’ve selected a lender, complete the loan application process. Provide all the requested information and documentation accurately and honestly. Be prepared to answer any additional questions or provide further documentation if needed.
  6. Review and accept the loan offer: If your loan application is approved, carefully review the loan offer, including the interest rate, repayment terms, and any associated fees. Make sure you understand all the terms and conditions before accepting the loan.
  7. Repay the loan: Once you’ve received the loan funds, make timely payments according to the agreed-upon repayment schedule. Paying off the loan on time will help you maintain a good credit history and potentially improve your chances of securing future loans.

Loan options for independent contractors

1. SBA Loan

The Small Business Administration (SBA) offers loans specifically designed for small businesses, including independent contractors. These loans often have favorable terms and can be used for a variety of business purposes.

2. PPP loans

The Paycheck Protection Program (PPP) was a loan program created in response to the COVID-19 pandemic. Independent contractors could apply for PPP loans to cover payroll costs and other eligible expenses. These loans may be forgivable if certain conditions are met.

As of 2021, PPP loans are no longer offered.

3. Grants

There are various grants available for independent contractors, especially in certain industries or for specific purposes. Grants do not need to be repaid and can provide financial support for your business.

4. Personal loan

Independent contractors can also consider personal loans for their financing needs. Personal loans are typically based on your personal credit history and may have higher interest rates compared to business loans. Here are some of the most popular personal loans 1099 workers have used recently:

5. Line of credit

A line of credit is a flexible financing option where a lender approves you for a certain credit limit, which you can draw from as needed. This can be useful for managing cash flow or covering unexpected expenses.

6. Co-signed loan

If you have a lower credit score or limited income history, you may want to consider having a co-signer on your loan application. A co-signer with a strong credit history can increase your chances of getting approved and may even help you secure a lower interest rate.

7. Payday loans

Payday loans are generally not recommended for independent contractors unless necessary since they often come with extremely high interest rates and fees, making them a costly and risky option for borrowing money. It’s best to explore other loan options that offer more favorable terms and conditions.

Alternatives to personal loans for 1099 workers

1. Bank loan

If you have a good credit history and a strong relationship with a bank, you may be able to qualify for a traditional bank loan. Banks often offer competitive interest rates and flexible repayment terms.

2. Online loan

Many online lenders specialize in providing loans to independent contractors and self-employed individuals. These lenders may have more flexible requirements and faster approval processes compared to traditional banks.

3. Business line of credit

If you have an established business, you may be eligible for a business line of credit. This type of financing allows you to borrow up to a predetermined limit and only pay interest on the amount you use.

4. Invoice financing

If you have outstanding invoices from clients, you can consider invoice financing. This involves selling your unpaid invoices to a lender in exchange for immediate cash. The lender then collects the payment from your clients.

5. Crowdfunding

For specific projects or business ventures, you can explore crowdfunding platforms to raise funds from a community of supporters. This can be a good option if you have a compelling story or unique product/service.

6. Peer-to-peer lending

Peer-to-peer lending platforms connect borrowers directly with individual investors. These platforms often have more lenient lending criteria and can provide access to funding for independent contractors.

7. Business credit cards

A business credit card can be a useful financing tool for independent contractors. It allows you to make purchases and access a line of credit that you can repay over time. However, be mindful of the high-interest rates and fees associated with credit cards.


No, self-employed individuals and contractors are not the same thing. Self-employed individuals are those who work for themselves and have control over their business operations. They may have multiple clients or customers and are responsible for managing all aspects of their business. On the other hand, contractors are hired by a company or individual to perform a specific task or project. They are typically not considered employees and are responsible for their taxes and expenses.

Getting a loan as an independent contractor can be more challenging compared to traditional employees. Independent contractors typically have irregular income and may not have the same level of job security as employees. However, there are loan options available specifically for independent contractors, such as personal loans, lines of credit, and loans for 1099 income. Independent contractors need to have a good credit score and be able to provide proof of income to increase their chances of getting approved for a loan.