How To Ensure Your Loan Application Is Approved As A Self-Employed Person

How To Ensure Your Loan Application Is Approved As A Self-Employed Person

Self-employed people face several unique challenges when qualifying for a loan. Banks and lenders require more documentation from people who work for themselves, especially if their business has been around for less than two years. If you are self-employed, here are several things to ensure that your loan application gets approved.

1.  Be Up-to-Date on your Taxes

The self-employed people who are in the best position to receive a loan are those who have had a business for more than two years and have filed their returns accurately every year. If you have been involved in any industry that requires you to file returns or submit tax documents, make it a point to stay on top of your filings. Tax professionals are an excellent resource for this. They can help you with your business taxes and ensure that you don’t miss deadlines.

2.  Have a Solid Business Plan

Lenders want a business plan before extending you a loan. To complete your business plan, you’ll need to know how much money you actually need. Write down all of your expenses and liabilities, including your existing debts and the costs of operating your business. You can use a spreadsheet, budget notebook, or similar tool.

3.  Don’t Over-Extend Yourself

Before getting a loan from any lender, you need to make sure that your business is on sound financial footing. A lender will ensure that you have enough money to cover both your loan payments and your operating expenses by checking your cash flow. They will also make sure that you have a good cushion if something happens to put a hole in your business’s operating expenses. Having savings or additional income to cover your expenses is a great way to make sure that you can get a loan. You can save some money on your living expenses by buying a house near your business. VA homes for sale are an excellent place to start looking.

4.  Get a Co-Signer

7 Factors Lenders Look at When Considering Your Loan Application

If you have a good business plan and have been in business for at least two years, you might not need to put up any collateral for your loan. If you haven’t been in business for two years, you might need to find someone willing to co-sign your loan. Co-signers take on the same obligations and assume the same liabilities as borrowers. Borrowers are obligated to repay their debts, and co-signers are equally obligated. Co-signing for a loan isn’t something you should take lightly. You want to make sure that you know the person well enough before you co-sign on a business loan, and you will want to keep them updated on your business plan, especially if it has changed over time.

5.  Get a Business Credit Report

The first step before applying for even a small loan is to get a credit report. You can get this on your own or use a company specializing in providing credit reports to small businesses. The process for getting a business credit report is similar to getting any other type of report, and there are generally no costs associated with obtaining one. The most important thing to look at is the history of payment.

6.  Get a Business Insurance Policy

Before you can get a small loan for your business, you will want to get the business’s insurance policy in good standing. A lender may require that you show proof of your insurance policy before they will approve your loan. Make sure that your insurance policies are in good standing every year, as well as renewing them on time. The best way to ensure that your policy is in place is by carrying it through a company specializing in insurance for self-employed people and other small business owners.

7.  Show Proof of your Personal Assets

As part of your loan application, you’ll need to prove some of your assets. Most lenders will want documentation showing that you have at least $1 million in liquid assets, including cash and investments. You can offer documentation of many types, including documentation showing that you own assets such as a home or vehicle. If you have personal family members willing to help you out, the lender may allow you to use assets from family members as part of your collateral.

In conclusion, there are many things that you, as a self-employed person, can do to ensure your loan application is approved. You have to ensure that your business is running smoothly and take steps to ensure your loan application is approved as a self-employed person.