Yes, you can get a business loan if you are self-employed – plenty of lenders offer loans for sole traders and freelancers. The application process is a little different from that of a limited company, since lenders lean more heavily on your personal income and trading history rather than company accounts.
Mainstream banks tend to be more cautious, but a number of alternative and specialist lenders, including Acceptance lenders, will always consider an application.
What Documents Will I Need to Provide as a Self-Employed Applicant?
As a self-employed applicant, you’ll usually need to provide proof of income, such as your SA302 tax calculations or full tax returns from HMRC, along with recent business bank statements. Some lenders may also ask for an accountant’s reference or your latest set of accounts if you have them, to build a clearer picture of how your income has looked over time.
Does Being Self-Employed Impact How Much I Can Borrow?
Yes, it can. Lenders often base how much they’ll lend on your net profit or personal income rather than company turnover, which can mean a lower borrowing limit than a similarly sized limited company might be offered. This is particularly true if you’ve only recently gone self-employed and don’t yet have a long track record of income to show.
Will I Need to Give a Personal Guarantee as a Sole Trader?
Not in the same way a limited company director would, since as a sole trader you’re already personally liable for your business debts, there’s no separate legal entity shielding your personal assets in the first place. Some lenders may still ask you to sign additional terms confirming this liability, but it isn’t the same as overriding limited liability protection, because that protection doesn’t exist for a sole trader to begin with.
Do I Need to Have Been Trading for a Certain Length of Time?
Most mainstream lenders like to see at least one to two years of trading history before approving a loan, since this gives them a clearer view of how consistent your income has been. If you’ve been self-employed for less time than this, specialist or alternative lenders are generally more willing to consider your application, even with a poorer credit history, though often at a higher interest rate to reflect the added risk.
See also: Can I Get a Business Loan with No Personal Guarantee
What Type of Business Loan Suits Self-Employed Applicants Best?
Unsecured loans and revenue-based finance tend to suit self-employed applicants well, since they’re assessed against your income and cash flow rather than requiring assets to secure against. If your income fluctuates seasonally, it’s worth looking for a lender who’s used to working with irregular income patterns, as they’re more likely to structure repayments in a way that fits how your money actually comes in.
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