What Loans Can You Qualify For When You’re Self Employed
Lack of access to funds is one of the main obstacles new entrepreneurs face. And although there are quite a few options available for those starting a new business, the loan terms that come with the money borrowed can sometimes be tough to accept. In this post, we’ll look at what self employed loans are and how one can help you start or grow your business.
According to a FED Small Business survey, a new or small business is much likely to face financial challenges than larger firms. Unfortunately, with the COVID-19 pandemic, it has made the situation even more complicated for those with self-employment income. Although not all lenders in Canada will want to approve personal loans or mortgages to self-employed people whose’ income fluctuates from month to month, these types of borrowers are eligible for virtually all of the same loan products available to others. They just need to find the right lenders to work with.
If you’ve already started your hunt for the best loans for being self-employed, you’ve probably discovered that most traditional banks and credit unions in Canada are more stringent about who they lend to. Most low-cost options are not available to new business owners without a few years of strong credit and steady income.
At this point, the typical question that might come to your mind is, “Where do I get self employed loans from?”
Steps To Take When Looking For Self Employed Loans
You have the end in mind, but where do you start when trying to find lenders who approve self-employed loans? And how to make sure that you get approved for a loan?
An excellent place to start with your loan request application process is to ensure that you are prepared with past tax returns, bank statements, and other documents that prove your income. Also, keep in mind that your credit score is also an important measure of how lenders, including private lenders in BC, will perceive your creditworthiness. A high credit score can put you in a much better spot than a low one, so be prepared to put in the work to improve it before you go and apply for any type of personal or business loans.
As the lender evaluates your loan application, they will request additional proof of income information, especially if you’re self-employed. Your lender wants to make sure you have more chances to get a loan, So, it’s essential to look at your financial situation from the lender’s perspective:
- What does your financial information look like? It should include annual proof of income and income sources and monthly housing expenses and debt obligations.
- If you are looking for a home equity loan in BC, what’s the equity saved up in your piece of real estate?
- Can you provide any federal tax returns for the past 24 months?
- What are the monthly payments you are comfortable with?
- What is your credit history?
- What is your experience or expertise?
- Do you receive income from multiple sources, like a contract or freelance work for various clients?
Personal Loan Amount For Self Employed
“How much can I borrow self-employed?” is a question we often receive from new entrepreneurs trying to start their business.
The maximum loan amount is the total amount that an applicant is authorized to borrow. Maximum loan amounts are used for all loans from credit cards, standard loans, or lines-of-credit. Going back to the maximum quantity for self-employed loans, as a general guide, whether you are employed or self-employed, you can typically borrow not more than the equivalent of 5 times your proven annual income. Keep in mind that some lenders may consider less, such as 4 or 4.5.
How A Mortgage Broker In BC May Help
Alternative mortgage lenders, banks, credit unions, and the rest of the products and services for self-employed loans can quickly turn into an exhausting journey, especially if you are new to traditional and non-traditional bank products.
If you’re a new entrepreneur and considering borrowing money, the first step is to check your budget to see what you’re able to spend on a monthly payment. The next step is to work with a trusted mortgage broker that can help you compare loans from multiple places, including banks, private mortgage lenders, and credit unions. When it comes to self-employed loans, comparing offers from various lenders can help you find a product with the most competitive terms and fees. So, get in touch to find out how we can help you get money fast, easy, and with the best loan terms and conditions.
In the meantime, you might find some of our other articles interesting as well:
- How To Get Pre-Approved For a Home Loan
- Can I Get a Home Equity Loan With a 500 Credit Score?
- Using Private Mortgage Lenders For Bad Credit