Small Business Loans for the Self Employed

When you are someone who is looking for funding to start your business; you need to know what you need to have in order to get funded. The banks and lenders are looking at more than you realize.

You would think that everyone who applies for a small business loan is self-employed, but the majority of loan candidates that banks see each year are actually W-2 employees who are looking to start their own business. Very few first time entrepreneurs come from a 1099 background. It’s easy to prove income when you file for a tax return every year. As a self-employed independent contractor there are more questions to answer and more hoops to jump through.

When a lending institution goes through the process of approving someone for a business capital loan they look first for stability of income, then they want to see payment histories and credit ratings. Believe it or not, your credit score is not the first number they want to examine. An experienced loan officer, particular in this economic climate, knows that credit scores can be deceptive. Income weighed against expenses and payment histories is the only true way to measure a candidate’s credit worthiness.

Of course, there are still many banks that won’t give you working capital finance without a decent credit score. That’s why it is best to apply online where you’ll get a number of different banks, credit unions and lending institutions competing for the privilege of lending you money. Their business success depends on approving as many candidates as possible, so don’t think you can’t get a loan if your history is a little shaky. Apply at enough places and you’ll be sure to find someone willing to lend you the money you need for your new venture.

Since 2008, the mortgage market in the United States has taken a significant beating. Since lenders chose to use creative financing like adjustable rates to get first time buyers into homes, they now have to be more stringent on the rules and guidelines for issuing new mortgages. They are essentially under a microscope with very little room to negotiate. The foreclosure rates from their previous customers are still going up.

The small business lending market is not in the same position. The mistake that many entrepreneurs make is thinking that they can’t get the money they need to get going. Even if you’re self-employed right now you can still get a loan. If you have a good idea and want to start something up, take a shot at borrowing the money to do it. That’s the only way we’re all going to get out of this mess we’ve gotten ourselves into.

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