In general, self-employed people can apply for the same types of loans that traditional, more formally structured businesses can. While lenders may want to see more documentation and the application process may be a little stricter, there are several loan options for self-employed entrepreneurs.

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What is a self-employment loan?

A self-employed loan is a type of loan small business owners or independent contractors take out to pay for business-related expenses. These loans often have a much higher loan amount and more favorable terms, and depending on your credit score and other factors, can have lower interest rates. However, they are more difficult to qualify for and often have a variety of requirements or restrictions in order to apply.

How do self-employed loans work?

If you need financing for business-related costs, such as inventory, supplies, machinery, equipment, or others, you can use a self-employed loan. The biggest difference between self-employed loans vs. other funding like traditional personal loans is that the requirements are often much stricter, and the loan amounts can be much higher.

When you apply for a self-employed loan, you’ll likely have to provide a variety of documentation such as tax returns, pay stubs, bank statements, profit/loss statements, and others to prove your business generates enough income to repay the loan. If you’re approved, you’ll receive the funds, and you can use them for what you need. Then, you’ll repay the loan in monthly installments, plus interest, until the loan is completely repaid.

Loan options for self-employed workers

If you’re self-employed, there are a few recommended loan options available:

1. Business loan for self-employed

SBA loans are small loans offered by nonprofit community-based lenders and are one loan option for self-employed businesses. These loans are guaranteed by the SBA and are typically good options for business owners who don’t qualify for traditional business loans. These loan amounts can range up to $5 million (or SMA small loans cap at $350,000) and can be used for a variety of business needs.

You may be able to qualify for an SBA loan whether you’re self-employed and only have yourself, or if you have 100 or more employees. However, there are strict qualifications, and you may need to provide collateral. You also must apply directly with the SBA, through a bank or lender that offers SBA loans for self-employed borrowers.

2. Personal loan for self-employed

Personal loans can be used for just about anything, including funding business expenses. Personal loan amounts can range from $1,000 to $100,000, and financing, interest rate, fees, and terms depend on your credit score, credit history, income, and other factors.

If you’re a small business that’s just started out, or you don’t have collateral to secure a business loan, a personal loan can be a great option.

Compare: Best Personal Loans

3. Emergency loan for self-employed

Emergency loans are usually a personal installment loan, though sometimes they can be short-term secured loans like payday or title loans. These loans are smaller and can be used for just about anything, considering they are a type of personal loan.

Online lenders typically are the best option for emergency loans because of the quick application, approval, and funding processes. They also have more flexible requirements compared to banks or other alternatives.

Payday loans and title loans can be options but are not recommended because they have significant fees and outrageous interest rates, even up to 400%.

Emergency loans should only be taken out in the event of an emergency need for financing. If you can, take time to shop for and compare lenders to make sure you choose the best option for your business.

Compare: Best Emergency Loans

Where can you get self-employed loans?

Many self-employed loans are available at the same places as personal loans, including banks, credit unions, and online lenders.

  • Banks offer personal loans that can be used for small business financing, but they also offer small-business bank loans. There are a few downsides to this, including the fact that only about 13% of business loan applications are approved, and approvals can take months. You also likely need to have been in business for several years, have excellent credit, and even provide collateral.
  • Online lenders typically have more flexible requirements than banks, and borrowers may be able to qualify with credit scores as low as 600. However, the lower your credit score, the higher the interest rate and the more expensive the funding will be. Online lenders also have faster application, approval, and funding processes.

Who are self-employed loans best for?

Self-employed loans are best for freelancers, independent contractors, or small business owners who need funding for business-related expenses. They are also best for borrowers with an excellent credit score (680+) and verifiable, steady income that will cover the minimum monthly payments.

Keep in mind these loans are a type of debt, which can make managing your business cash flow more difficult. Be sure you really need the funding and explore other alternatives first.

What documents do you need to provide for a loan while self-employed?

When you apply for a self-employed loan, the lender will need reassurances that you’ll be able to repay the loan within the designated term. They may ask you to provide documentation such as:

1. Tax returns and tax transcripts

Providing tax documents from the previous year can help show your annual income, which can prove you make enough to repay the loan. Check with your tax preparer, tax software provider, or the IRS if you need a copy.

2. Bank statements

Bank statements can also show regularly deposited income, which can be used as proof of income. Not all who are self-employed have regular payments, so bank statements can help show how much you get paid and when.

3. Profit and loss statements

Also known as business ledgers, these statements are summaries of your costs, expenses, and revenue and can show a lender more information about your income.

4. Benefits

If you’re receiving government benefits such as Social Security, it can be used as proof of income. Get a copy of your benefit verification letter from the appropriate government website.

5. Collateral

A lender may be more likely to approve your application for a secured loan if you can offer some sort of collateral. This can be an asset with value, such as a car, house, or bank account, that you use to support your loan application. Keep in mind that if you don’t repay the loan, these assets can be seized by the lender.

6. Cosigner

Having a cosigner can also help improve your chances of getting self-employed funding. A cosigner is pledging to repay the loan in the event you can’t. They usually must have an excellent credit score (680+) and proof of steady income to qualify as a cosigner.

Related: Personal Loans With a Cosigner

Is taking a self-employed loan a good idea?

Taking out a self-employed loan is a good idea if you’re a small business owner or are self-employed and need funding for business-related expenses. However, self-employed loans often have stricter requirements than regular personal loans or loans for other reasons, so you’ll want to be sure to be prepared with things like:

  • An excellent credit score
  • Proof of income (including tax returns, bank statements, etc.)
  • EIN
  • A certain period of time in business

These loans can be really helpful for business owners needing funding; however, keep in mind that taking out personal loans or personal debt for business expenses can lead you down a slippery slope. Be sure you qualify for a low credit score and affordable loan terms before applying.

Pros and cons of self-employed loans

Lower interest rates with excellent creditFees
Can be unsecured (no collateral)High interest rates with bad credit
Loans created specifically for small business ownersCan lower credit score if not paid on time.
Can help build creditStructure requirements; more difficult to get approved
Can be used for a variety of business needsMust provide extensive documentation supporting application
Interest payments can be tax deductible

Self-employment loans for bad credit

If you have bad credit, your self-employed loan options are much more limited. This is because you likely won’t qualify for the most affordable rates and terms. The better your credit score, the lower your interest rate and the better your monthly payment.

However, it’s not impossible to get a loan. Secured loans and loans with a cosigner are options you can explore.

Pros and cons of self-employed loans for bad credit

Funding for necessary business expensesMore difficult to get approved
Can help build creditHigh interest rates
Interest can be tax deductibleMay need collateral or consigner
Terms not as favorable

Alternatives to self-employed loans

Loans aren’t the only financing option for those who are self-employed. Alternatives to explore include:

1. Business credit cards

Depending on how much financing you need, a business credit card may be a better option than a loan. Not only can they offer financing up to your credit limit, but they can help you establish a business credit history, which will help you qualify for larger loans in the future. You may also be able to earn additional perks like cash back or points, or a 0% introductory APR.

Your credit score and history will help determine the credit limit, interest rate, and fees on a business credit card. Unlike regular credit cards, you’ll have to provide information about your business such as the legal structure, estimated monthly spend, and EIN.

2. Business lines of credit

A line of credit is like a credit card in that you can borrow the money you need up to a certain limit and pay off the purchases over time. However, unlike credit cards, you can have a line of credit for a short period of time and interest is charged only on what you borrow.

Lines of credit also usually have higher limits than credit cards, but you’ll likely need to have several years of established business history to qualify.


If you own your home, you can use its equity to help secure financing. A home equity line of credit (HELOC) or home equity loan (HEL) allows you to borrow money from your home’s equity. These loans often have lower interest rates than other types of loans, but the downside is you risk losing your house if you can’t make your payments.

Related: Home Equity Loans vs. HELOC

How to qualify for a self-employed loan?

Self-employed business owners are often seen as riskier to fund compared to more formally structured businesses, which can make the loan application process stricter and the approval process more difficult. This is because there’s technically no legal separation between a self-employed business owner and the business, so your personal assets may be at risk if the business is not successful or is sued. This can significantly affect your ability to make loan payments.

Typically, you’ll need a credit score of 680+ to qualify, plus a solid credit history. To qualify, start with these steps:

Check your
credit score

Shop around
for the best lender

Fill out an application
for approval

Submit your

However, keep in mind that many lenders have other requirements for those who are self-employed, such as:

  • Minimum time in business (usually at least two years)
  • Annual revenue requirements
  • Credit requirements

They may ask for proof of business plans, financial statements, tax returns, and other documentation to help prove you can repay the loan on time.

How to qualify for a self-employed loan?

The steps to getting a self-employed loan are similar to getting a personal loan:

  1. Check your credit score. Review your credit score and credit report and be sure the information is accurate and complete, and your score is high enough to qualify you for lower interest rates and better loan terms.
  2. Shop and compare options. Do research on the lenders available and the different types of self-employed loans you may qualify for. Find ones that offer loan terms and amounts you’re looking for and that you qualify for with your credit score. Also compare interest rates and customer service reviews. Be sure you meet the requirements for self-employed borrowers.
  3. Get prequalified. This won’t affect your credit score, but will give you a more personalized estimate of the loan amount, monthly payments, and interest rate you’d qualify for.
  4. Submit an application. Once you find the lender that’s right for you, submit a loan application. You’ll be asked to provide personal information and documentation, including business documents like bank statements, tax returns, and others.
  5. Sign loan agreement and receive funds. After your application is approved, you’ll have to review and sign the loan agreement, and then the lender will deposit the funds into your bank account.
  6. Repay the loan. You must start repaying your loan right away. Late or missed payments could result in fees or penalties and damage to your credit score.

Factors to consider when comparing self-employed loan lenders

When comparing self-employed loan lenders, look at information such as:

1. Interest rates:

Borrowers with lower credit scores may be charged higher interest rates, but it varies from lender to lender.

2. Repayment Terms:

One of the benefits of choosing a self-employed loan is that you can choose the loan term. It usually ranges between one and seven years.

3. Loan amounts:

Many lenders don’t do smaller loans under $600, so you may need a different option. Which is covered in our “alternatives” section.

4. Fees:

Check the origination fees and any monthly charges you’ll incur during the life of the loan. Use those as a comparison point between lenders.

However, self-employed loans may have stricter requirements or require additional documentation, so you’ll also want to consider factors like:

Income requirements. You’ll have to show proof of income to a lender, which is the taxable amount that’s reported to the IRS. If you don’t meet income requirements, you will likely need a cosigner or collateral to improve your chances of approval. You’ll also need to prove consistent income year-over-year.

How to apply for a self-employed loan?

Once you’ve done your research to compare lenders and chosen the right one for you, check your credit score and ensure you meet all loan requirements. Then, fill out the loan application (either online or in person). You will need the following documentation in physical or digital format:


Valid State Driver’s
License or State ID


Proof of current


Valid checking account
for direct debits


Most recent
W2 or 1099

You’ll likely also need other information as listed above to prove your income and other factors. It will be helpful to prepare all information and documentation ahead of time to ensure your application process is smooth and increase the chances for approval.


If you’re an independent contractor, you can apply for an SBA loan, 1099 loan, or independent contractor loan. There are also private loans available. Simply research your options and complete the application process, including submitting required documentation.

For self-employed business owners, there are several loan options available including business loans, personal loans, and others. Shop and compare lenders to find the best one with the lowest interest rates and best terms, as well as the qualifications you meet. Apply, including required documentation, and if approved, accept the loan and receive the funds.

Yes, you can apply for PPP via any participating lender. To apply, you must calculate payroll costs and provide required documentation during the application process. To qualify, you must meet the following criteria:

  • You were in operations as of February 15, 2020
  • You are an independent contractor, sole proprietor, or other qualifying business classification with self-employment income
  • In 2020, you filed a Schedule C or Form 1040
  • Your primary place of residence is the U.S.

Other requirements may apply.

Proof of income is a critical factor lenders will take into consideration, so your options will be very limited if you don’t have proof of your income. You may be able to get a small emergency loan, like a pawn shop loan, depending on collateral you have to offer, but you’ll likely be risking your assets or paying extremely high APR.

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