Being your own boss can be great, even if it is a lot of work. Today’s online and data-driven business models have opened the door for many people to become self-employed, and it is easier than ever before. But unfortunately, today’s lenders aren’t always “loan friendly” to the entrepreneur mindset. With that in mind, here are some self-employed loan tips.
Self-Employed Loan Tips
Be Organized
One of the best actions you can take when preparing for self-employed loans is to make sure that everything is organized correctly. You’ll want to be as diligent as possible. Make sure that you have records covering a decent time span. But you’ll want to go back at least six months.
While you are getting organized, make sure to include those records that lenders will use in approving your loan. Some things to keep in mind are alternative forms of income, such as rental properties and investments.
Other items you’ll want to keep organized are tax returns. Make sure that everything is current and updated. Also, if you have back taxes you owe, it can help getting a loan if these are taken care of first.
Don’t forget to include details about any savings you have as well. This can be funds stored in a savings account or term investments with a financial center.
Choose the Right Lender
The ideal lender for a self-employed loan is one that understands the uncertain nature of being on your own. Some lenders offer flexibility, which can be beneficial in this case.
Another thing to look for in a self-employed lender is one that will accept alternative documentation for credit approval. Since you won’t have the standard W2, the lender will need to be able to look at all of those organized documents you have and be able to make a decision using that material.
Since the self-employed income can vary throughout the year, you should try to find a lender that allows for flexible repayment options of your hard money loan.
For example, you may be able to make extra payments during a high-income part of the year to cover the lean periods. Many lenders do allow this, so be sure to verify that this is offered up front.
There is nothing better than being your own boss, even if there are times when it isn’t always convenient. When it comes to getting a business loan, you’ll find that doing a little research up front can help make your application successful.
Just be sure to be organized, pick the right lender, and be as accurate as possible when you apply.