For the self-employed, financial life is usually associated with many uncertainties. The dependency on customer payments, regular investments in the company and problematic bank credit ratings make it difficult to achieve financial security and independence.
Particularly with regard to loans and credits, entrepreneurs, freelancers and start-up entrepreneurs have a considerable disadvantage compared to employees. The lack of fixed income makes it harder to convince banks that you are a good borrower. However, banks have adjusted to this in recent years and now offer products specifically tailored to self-employment.
Why are loans for the self-employed a problem?
It is not so easy for self-employed and entrepreneurs to lend money from a bank, even though this group of people would most likely need it. The financial uncertainties and bottlenecks associated with self-employment are a problem, especially in the early years, and not infrequently the hurdle that leads to the end of business start-ups.
The reason is quite simple:
As a rule, banks require a corresponding credit rating for a loan. This is only given if a borrower can prove that he has a corresponding income. The natural insecurity and lack of consistency in monthly income make it difficult for entrepreneurs to follow these conditions.
In addition, there is usually no collateral available. If the banks were still able to seize the salary of an employee in the case of the case, it is not so easy for a self-employed person who has no guaranteed income from his work. In addition, especially with young founders usually no collateral can be found with which a loan can be secured. All this makes the topic of self-employed loans a problem.
Of course, there are also some forms of loans that are tailored exclusively to the needs of founders, entrepreneurs and freelancers. These enjoy a high popularity in recent years. Again, it is important that borrowers have appropriate knowledge of what things are expected of banks and what options can increase the chance of a loan.
In addition, it is important for self-employed in many cases to check whether the money may be used for private purposes at all. Especially loans from development agencies are mostly tied to investments for the working environment. Here, therefore, a clear distinction must be made between the private life and the business existence of the self-employed.
What tips are to be considered for loans for self-employed?
To increase the opportunity for a loan from self-employed, start-ups and entrepreneurs, there are some recognized tips. These feed on the experience with the banks and the various rejections in recent years. Often it depends on the documents that are used by the banks. But even self-employed must pay attention to some factors in the selection of loans, if they want to benefit from low interest rates and good offers.
1. Even self-employed should compare
The choice of loans and credits may not be as high in the case of entrepreneurs as in the classic employee, but it is important that the different options are compared exactly. Interest rates fluctuate very much and the self-employed can, of course, also profit from the fact that the conditions are currently so favorable.
2. Have the company’s documents ready
While employees can simply and quickly submit their submission papers when applying for a loan, this option is of course not available if no salary is paid at all. Nevertheless, when applying for a loan, banks will insist that they get an insight into the applicant’s income. These can, for example, be in the form of a profit and loss account from the previous year.
3. Promotional loans – use the business plan
Every company should have a good and meaningful business plan today. Not only does it provide good business practice orientation, it is also an important tool in approving development loans of all kinds. The details of the business plan, of course, depend on the industry, the form of the company, and your goals.
4. Determine exact planning for financing needs
In many cases, the rejection is not based solely on the Bank not considering the applicant as solvent. Above all, the wrong framework for financing is often simply chosen. Either the terms are too long, the rates for your own credit rating too high or the total does not match with the numbers you have handed over to the bank.
5. Fall back on a guarantor in case of difficulties
If the application is rejected, this does not automatically mean the end to the hope of fresh capital. One way to get credit as a self-employed person is to go with the guarantors.
If you are self-employed and have no collateral, it is almost impossible to get a loan. But that does not mean that it is impossible. However, when it comes to collateral, it is as easy for self-employed to get a loan as for a permanent employee. As security, a car can serve or even a property. If you are self-employed and need a little money at short notice, you can also go to a pawnbroker. There you go and deposit something valuable, such as jewelry or a laptop as security and get a small loan. When you have paid off the loan, you get the item you pledged again. If not, it will be auctioned off.
What collateral does a bank require?
First of all, it is important that there is a reasonable reason for borrowing. If, as a borrower, you indicate that you want to modernize or refurbish your business, this is better than taking credit for a vacation. Because who puts his money in the equity of his company, which strengthens his company, which increases the repayment probability of the loan. This is not real security, but it is important.
Use a second borrower or a guarantor
If you live in a partnership or have relatives who trust you, then you can use a second borrower, provided that he has sufficient credit standing and a firm and permanent employment contract. Then there are usually no problems with lending. Then, in the event of a credit default, both borrowers are liable up to the full amount of the liabilities.
5 tips for reputable loans for the self-employed
1. Compare providers
Who looks for a reputable loan for self-employed, which should compare the offers exactly. There are countless providers and many are trying to get the best conditions for themselves. However, some are so outlandish that they are recognized at first glance.
2. No big promises
Great promises are made in loans. However, this is a big problem for the self-employed, because there are clear guidelines under which circumstances a self-employed person receives money from a bank. Great promises that even small businesses could get up to € 500,000 or more are simply utopian.
3. Credit is the alpha and omega
For a self-employed is the credit rating and the A and O. Thus, there is also no bank that offers a loan, if this is not available. Therefore, it is also necessary to distance oneself from offers that promise loans for the self-employed without creditworthiness. The risk of default would be far too high for a German bank to agree to.
4. Pay attention to collateral
Anyone who seeks a reputable loan for the self-employed on the Internet and comes across offers that promises a loan for immense sums, even without collateral, is probably a fraud. A loan without collateral for self-employed is simply not. Since there is no regular income, the loan must be secured at a German bank by other means.
5. The fine print
Even if everything is superficially correct, you still have to pay attention to the fine print. Here you can hide terms and conditions that make the whole loan considerably more expensive. Special caution is required with so-called assignment clauses. For example, they stipulate that certain property of the entrepreneur is transferred to the lender in case of non-payment.
Such clauses are not permitted, because material can be made into money for the bank only through a seizure. This must be confirmed by a court and be prompted by such a. Toggle contracts should not be accepted in any case.