Are you wondering how to get a personal loan when you’re a solopreneur? If so, check out the following helpful guidance.
Create Pay Stubs to Prove Your Income
Running a one-woman business can be challenging and there are sure to be times when you need to take out a loan. But if you’re pre-revenue or in your first year of business, it can be difficult to qualify for a loan. Why? Because the lender will want to see proof of income. If you have not yet done your first year’s end-of-year taxes or if you have not yet reached the revenue stage, proving your income becomes very tricky.
You will not have W-2 forms or paystubs from an employer. Thankfully, while you may find it difficult to get a business loan, you still have the option of taking out a personal loan to use for business purposes. You may still need to prove your income to show you can earn enough income to make your monthly payments, but you do not need to show as much documentation in general and you can use an online paystub maker to prove your past earnings or monthly revenue.
What to Do Before You Apply for a Personal Loan
Once you’ve decided to take out a personal loan as a self-employed woman, the first step is to check your budget. You need to know how much you can afford to pay back each month on the loan payment before you accept a personal loan and find you’re in over your head. Secondly, to qualify for a personal loan, you’ll usually need to have a pretty good credit history. Lenders will check your credit score, so if you currently have a poor credit score, you’ll want to try to improve it before applying for a personal loan. However, there are some lenders who are more favorable to people with less than high credit scores. If your credit score isn’t good enough to secure a personal loan, you always have other options such as crowdfunding or a private investor.
Where to Apply for a Personal Loan
You can get personal loans from institutions like banks, credit unions, and online lenders. In order to find the most competitive terms and fees, it’s vital you shop around and compare different lenders before applying for a loan. A traditional bank loan is often an entrepreneur’s first port-of-call. Banks typically offer personal loans for business purposes that have flexible repayment plans. Also, a personal loan will always have a fixed amount, so you can’t go over the balance like you could with other credit options like credit cards. Some banks will even offer you a deferment period of a few months if you are just getting started with your business.
There are also numerous online lenders that specifically cater to self-employed people. Here are some of the best:
· Upgrade offers unsecured installment personal loans. You can get a loan up to $50,000, but your business must have been in operation for at least two tax years.
· SoFi can lend you up to $100,000 as an installment loan, but the funds can only be used for certain things, including relocations and debt consolidation. SoFi will look at your credit score, your financial history, your monthly income, and your education to determine whether your application is approved.
· Upstart is perhaps the best option because it looks at you as an entire person rather than just your credit score. It’s also the first company of its kind to use artificial intelligence in its approval process.
WRITTEN BY
Claire Ward