Getting finance is a real nightmare for many self-employed. Banks are becoming more and more restrictive when it comes to lending, especially if you can’t just provide your car or house as security.
The chance of a bank loan for the self-employed is slim. It is, therefore, no wonder that the World Bank measures the global financing gap for small and medium-sized entrepreneurs at around USD 2 billion.
True to the motto: “A bank is a place where you can borrow money if you can prove that you don’t need it”. In the case of the self-employed, however, income often fluctuates due to the season.
This is often the reason to apply for a loan
Banks often take relatively old data into account when checking their creditworthiness. So the last income tax assessment may have been a while ago. If a business has developed well since then and the bank is not looking at individual BWAs, it can be very difficult to prove that the business has developed positively.
And if you have a negative Credit Checker entry, you don’t even have to register with the bank.
In many cases, the self-employed do not get a loan and therefore cannot invest enough in their sales, pre-finance goods, and larger orders, even though they have a strong credit rating. This is annoying because solid financing is an important part of growing business.
If every company had to save the necessary funds for larger investments before the investment could be made, many profitable projects would never come about.
So how do you get a loan despite being self-employed?
1. Foreign banks: If you are missing the Credit Checker information, you can secure a loan from a foreign bank. Credit Checker plays no role here so that a loan with sufficient income can be obtained from a permanent position.
Of course, certain requirements are also checked at a foreign bank. The amounts of such Credit Checker-free loans start at around USD 3,500. In addition, you should always be aware of additional costs, as these often arise in such cases and are not always communicated very transparently.
2. Credit from private investors: In order to fill the financing gap, a number of online loan brokers have been established in recent years.
This includes Good Credit, a global online loan broker that specializes in self-employed and small business loans. The loans at Good Credit are unsecured and Good Credit does not ask Credit Checker.
Instead, the creditworthiness is checked with the help of online accounts, in which the self-employed person connects to Good Credit during the borrower check. Good Credit then receives a one-time reading right, for example, on your PayPal account and checks the creditworthiness.
A loan despite self-employment is possible if you are willing to look for alternatives beyond the banking world. There are specialized providers on the Internet that are geared towards the needs of the self-employed and entrepreneur.
When is a loan suitable for the self-employed?
Now we know how to get a loan in Germany despite being self-employed. But when is a loan worth it? There are three scenarios in which a loan makes sense:
1. Finance sales growth
Many self-employed people run a profitable business. In such cases, the need for financing increases with sales, especially for dealers. Since suppliers first have to be paid out of their own pockets, many self-employed cannot afford to keep up with the financing of the increasing inventory.
Without the financing of the necessary goods, orders cannot be accepted and sales do not grow as quickly as they actually could. Such a situation can be avoided with a loan and additional sales can be generated.
2. Bridge liquidity bottlenecks
Most self-employed workers are aware of seasonal fluctuations in sales. Sometimes there are even fads that cause demand for certain products to skyrocket or crash – without anyone having been able to plan it.
Seasonal or fashion-related liquidity bottlenecks can be bridged with a loan in otherwise well-functioning business. In such cases, it is worth investing and expanding sales in well-running areas instead of falling into hibernation and hoping that things will go up again.
3. Buy larger quantities at cheaper unit prices
If you negotiate well with your suppliers, you can often achieve price savings with larger quantities. Most wholesalers and producers give bulk discounts on larger purchases. It is often impossible to finance an expensive purchase from your own pocket.
In addition, the popular cash discount can often be drawn if you pay immediately. But you need sufficient liquidity for this. The savings that can be achieved from volume discounts and cash discounts are often higher than the interest paid on a short-term loan.