• July 27, 2022
  • Adrina Martinez

Starting a business requires persistence, planning, and resource accumulation. Individuals considering starting their own business often need financial assistance to manage the costs.

In the initial stage between leaving jobs and working on a business idea, one requires to bridge the gap with money. However, self-employed individuals find it challenging to secure unsecured loans.

The reason is the unstable income source and no tangible business statistics, revenues, or turnovers. The lender providing loans requires some proof of affordability, lacking which these individuals face constant rejections from high-street lenders.

Why Are Lenders Strict About Self-Employed Individuals for Business Loans?

Most lenders are sceptical about lending to self-employed individuals owing to unstable income compared to a salary employed, who share a regular income mode. They find it easier to secure loans instead of self-employed individuals.

The other crucial reason is- They wish to avoid lending to an unemployed individual without minimal income proof. Because anyone can set up a limited company and call themselves self-employed, lenders fear losing money to borrowers in this situation. 

 However, Focus loans follow definite eligibility criteria, which ensure smooth borrowing. It is because we do not deny funds owing to a sceptical belief. Instead, ensure credible loan repayment and affordability proof before providing funds to individuals.

Every individual share some urgent requirements that one must meet within the sensitive time frame. Loans for unemployed UK help individuals pay for essential and unavoidable things without any credit or collateral restrictions. In this, one can qualify for a small amount by providing minimal income proof in the form of self-employed income.

However, some urgent expenses must be met without waiting for loan confirmation ping until 4-5 days.

Can I Get a Business Loan On Bad Credit As a Self-Employed?

Yes, you can get a loan whether you are a:

a) Sole trader: As a sole trader, you are solely responsible for your repayments

b) A limited company is a separate entity from its owners. Any loan repayments are the responsibility of the company rather than the owners.

c) In partnership: Two people run a single company in collaboration. Each person has their share in the company’s profits. They can manage the loan repayments together.

Why Might You Need a Business Loan?

You might need loans for any of the below reasons:

a) Business investment in stocks

b) Company vehicle

c) Fund small business expenses

d) Consolidating on loans

Which business loan Type can a self-employed qualify for?

Self-employed business loans break into – Unsecured and Secured loans

1) Secured business loans

Secured loans may be easier to qualify for self-employed individuals than unsecured loans. Secured loans may require you to provide collateral before you can get the loan. It is an ideal option for businesses with intangible business stats, business plans, or bad credit scores.

2) Unsecured business loans

Qualifying for an unsecured personal loan can be challenging for self-employed individuals. In this, the lender prioritizes the business’s credit score and trading history.

You may qualify for the loan if you share a futuristic and revenue-rich business plan. These are quicker to get than a secured loan. Here you do not have to provide details regarding the collateral or the asset you put, so the loans have fast turnaround times.

However, you may get the loan at higher interest rates. Non-repayment of the loan could affect your credit score, and you may find difficulty in getting the next.

3) Invoice Finance

A self-employed you can borrow money against pending invoices.

4) Asset Finance

In this, you can borrow money against an asset you bought recently. You can enter a hire-purchase or equipment leasing agreement for asset finance.

5) Guarantor Loans

Suppose you do not have collateral or do not want to risk it and lack a stellar credit score; you can get a guarantor or a third party on a loan. He can be your future business partner or someone from the family. A guarantor on loan works as a bridge between a self-employed and money.

It strengthens your loan application, and you may fetch lower interest rates. You need to be mindful of making regular payments, or else the credit score of both parties involved may suffer. Getting a business loan with guaranteed approval shares a low possibility in the UK.

6) Merchant Cash advance

 With this lending, you borrow a lump sum and then repay it through a pre-agreed percentage of your future customer debit card payments.

So, these are some ways a self-employed can fund the business's essential expenses without worries.  

However, lacking a good credit score and intangible business profile can be problematic. Do not worry. Sometimes, you can get bad credit loans no guarantor no credit check direct lender.

Can A Self-Employed Get Bad Credit Loans with No Credit Check?

In some situations, a self-employed person might not qualify for a massive amount in unsecured loans. The lenders require a stellar credit score to provide loans and lacking one becomes complicated for self-employed.

Apart from that, finding and convincing a person to provide security over a loan might be complicated. Finding such a person who readily agrees to be a guarantor is not easy. In this case, the self-employed individual can use collateral to get the loan. In this way, he can borrow a considerable amount. 

This way, one can get bad credit business loans on guaranteed approval. Check out the loan quotes from the best direct lender in the UK .

But to fund minimal requirements, some loans do not require a guarantor and are available at no credit check from lenders. Under this, one has to prove a minimal income to get the loans. 

 An individual can borrow up to £5000 to meet essential business expenses. These loans have quick turnaround times, which could be any reason like funding minimal money to get the equipment, to pay the bills while waiting for payments, etc.

 The requirement may arise anytime as a self-employed individual who lacks a regular income source. Thus, these funds help you meet the urgencies without any cash crunch at crucial times.

Is There Any Possibility to Fetch Loans For Self-Employed At A Bad Credit?

Getting loans for self-employed with bad credit can be challenging. As mentioned above, the lenders consider the profile risky without any potential business stats and credit score. Yes, getting a loan with bad credit might be challenging but not impossible.

Some may provide loans at a higher interest rate, and in some cases, you may get the loan at desirable interest rates but not the desired amount. Thus, shop around the best options and grab the one that aligns with your finances and current requirement.  

You can enquire about the best bad credit business loans if you want a smaller amount. You can get guaranteed approval from the best lenders in the UK. 

Primary Documents You Need to Qualify for a Loan as a Self-Employed

Different lenders share unique loan eligibility criteria. A borrower must meet the requirements, whether loans for the unemployed or secured. Here are standard documents that a lender may demand to approve a loan.

a) Id Proof

You must have a valid UK identity proof or a driving license

b) Address proof

It is a copy of a permanent residential or official address in the UK. You can submit council tax papers or utility bills for proof:

c) A copy of Tax Returns (SA302)

A self-employed must file a self-assessment with HMRC. Download your HMRC form and produce copies of the same before the lender. It states your income within the 1–2-year time frame. One of the primary considerations is securing business loans with guaranteed approval in the UK.

You may be asked to produce company details, bank statements, and rental income (if any) to get the loan.

Bottom line

Getting a loan from a direct lender as a self-employed might be challenging. But there are other small loans that one may qualify for. To fetch a big amount, secured loans work best. Channelize the requirement and borrow as per affordability.

Leave a comment

Your email address will not be published.