Personal Loans for Independent Contractors With Good & Bad Credit

What loans are available for independent contractors?

Independent contractors may qualify for unsecured or secured personal loans, variable-rate loans, business credit cards, lines of credit, debt consolidation loans, payday loans, and more. A little later on we will help our readers compare some of the best loan options for independent contractors.

Can independent contractors get SBA loans?

Independent contractors can qualify for SBA loans as long as they are legally organized as a sole proprietorship, operate for-profit, and do or plan to do business in the U.S. While there are other requirements to qualify for an SBA loan, these are the core of the requirements.

Can an LLC get a PPP loan?

If you are a sole member of an LLC you can apply for a PPP loan. Sole proprietors and independent contractors may also apply for PPP loans. The Paycheck Protection Program (PPP) was issued by the Small Business Administration (SBA). It's designed to help self-employed individuals survive the current economic uncertainty.

Our Top 5 Best Loans for Independent Contractors

As an independent contractor or 1099 worker, there are a variety of loan options available. Some options may be safer and easier to qualify for than others. While other options may just be better suited for your business. If you are an independent contractor considering a loan you should compare the following options to make an educated decision. While they did not make our list, independent contractors that need a small amount of cash that they can repay quickly can look into payday loans. independent contractors can Let's compare the top 5 loans for independent contractors...

1. Unsecured personal loans

Unsecured personal loans do not require any collateral making them a safer loan option for independent contractors. Since these loans do not require collateral lenders cannot take your property if you default on the loan. However, if you do default on an unsecured personal loan your credit score can take a major hit. In order to qualify for high loan amounts and lower interest rates, you should have a decent credit score and reliable income. If you are an independent contractor with bad credit you may still qualify for an unsecured personal loan. Most unsecured or secured personal loans offer fixed terms meaning the interest rate and payment should not change during the loan term. Whether you have good credit or bad credit you should apply for a personal loan through Acorn Finance.

2. Variable-rate loans

While variable-rate loans may offer attractive interest rates, their rates can change during the loan term making them a potentially riskier option. This can cost borrowers more money in the long term and it may be difficult to manage unpredictable monthly payments. If you plan to borrow money and pay it off quickly, a variable-rate loan may work well. However, if you plan to borrow money and pay it off over a longer-term we recommend choosing another option.

3. Lines of credit (personal or business)

Personal and business lines of credit can be compared to a credit card but with a lower interest rate. When you get approved for a line of credit, you will receive a credit line amount. You should have access to the money as needed and only pay interest on the portion you use. For example, if you have a line of credit with a $10,000 limit and a $5,000 balance, you only pay interest on the $5,000 balance. Monthly repayment can be determined by the balance. Lines of credit can be a smart financing solution for independent contractors. They can provide money if business fluctuates or help you finance projects that you have not been paid for. In addition, most lines of credit do not require collateral. You are probably waiting for the catch so here it is. . . you usually need a 680 or higher credit score to qualify for a line of credit.

4. Debt consolidation loans

If you are an independent contractor or 1099 worker with expenses totaling more than revenue or income you may want to consider a debt consolidation loan. While the goal of operating a business is to make money, you may have a few slow months that cause you to fall behind or get into debt. Independent contractors have more expenses than traditional employees. They are usually responsible for office space, office supplies, equipment, and more. Using a debt consolidation loan may be easier to pay than a stack of separate bills. It's a smart financing solution to simplify debt and move forward. If you can avoid getting back into debt and can qualify for a low-interest rate a debt consolidation loan may be for you. In order to qualify for a debt consolidation loan, your debt should be less than 50% of your income. Keep in mind, you should also have consistent income coming in to repay the debt consolidation loan.

5. Co-signed loans

If you are an independent contractor or 1099 worker credit challenges or a lacking credit history you can increase your chance of approval using a co-signed loan. The co-signer you choose should have a good credit score and consistent income. Adding a co-signer to your application can entice lenders to offer a lower interest rate and higher loan amount. If you are able to repay the loan on time you can boost your and your cosigner's credit score.

How do independent contractors get PPP loans?

If you are an independent contractor, self-employed, or gig worker, you may be able to get a PPP loan. If you're reading this, you may already know that, but how do you go about getting the loan? In short, you will need to apply with a bank or lender that offers PPP loans. You may want to start with your local bank that you maintain a checking or savings account at. If you have already received a PPP loan and are looking to apply again, you should go back to the same lender that assisted you the first time around.

However, before you go to the bank to apply, there are several things you will need to determine. First, you will want to determine the amount you qualify for. This can be determined using average monthly payrolls. If you are an independent contractor, you may not have payroll. If you do not have employees, you will need to follow the SBA instructions for calculating the amount you qualify for. You will want to have your most recent tax return handy.

Next, you will want to determine how much of the loan can be forgiven. If you borrow more money than you need or are allowed to cover payroll or other expenses, you may owe money back. Part of this step should be determining which expenses are eligible with a PPP.

With a bit of research and time, you may be able to determine these factors on your own. If you are struggling or dealing with an unusual situation, you should visit your local back for guidance. Whether you are ready to apply or not, you should bring 2 years of tax returns, payroll reports, legal company information, and documentation of how COVID-19 has impacted your business negatively.

How do PPP loans work if self-employed?

If you are self-employed the maximum amount you can borrow with a PPP loan is $20,833. If you are self-employed you probably don't have any employees. Therefore, your annualized salary is limited to $100,000. The entire amount that you borrow is eligible for forgiveness. To apply for forgiveness, you'll need to complete the Form 3508S. The forgiveness process can vary depending on the lender so you will need to check with your lender. If you have a PPP loan you will want to keep track of owner compensation and expenses. When you apply for forgiveness you'll need to prove expenses. If you are applying for a second PPP loan, you will need to show a 25% decrease in gross receipts. The decrease must occur between a quarter in 2019 and a quarter in 2020.

How do I get a loan for a 1099 income?

Surviving a global pandemic as a 1099 worker has been nothing short of tough for many of us. With market uncertainty and restrictions changing frequently, some of us have suffered financial issues. The good news is that most of us believe that the pandemic will pass and normalcy will return at some point. The hard part is keeping your business alive while the world gets back on track. If you are a 1099 individual, you can get a loan.

PPP loans are available for 1099 incomes. If you can jump through the hoops and dedicate the time to apply, you absolutely should. PPP loans are designed to help self-employed individuals with 1099 income survive a global pandemic. However, you may need more than just a PPP loan. Before you apply for a loan, you should understand how much income your 1099 states. As an individual with business expenses, you probably write off expenses. Therefore, your gross income and net income will probably be different. As a W2 employee, lenders may ask for gross income because they know a very good estimate of what your actual take home is. However, as a 1099 individual, a lender may focus more on your gross and net combined. In some cases, self-employed individuals try to avoid taxes by making their expenses much higher than they actually are. If you have been doing this it may interfere with your ability to get a loan.

Here are some other ideas you may need to consider:

Personal Loan: If you can prove 1099 income and have a good credit score, you may be able to qualify for a personal loan. Personal loans can provide individuals with cash. Once the loan is funded, you can spend the funds however you need to. Whether you intend to use them for business or personal expenses, you don't have to disclose where every dollar goes to the lender. Personal loans offer fixed monthly payments which can make them easy to manage. However, you will have to pay the money back. You should try to get a PPP loan before applying for a personal loan.

Home equity loan: you own a home and have equity in it, you may be able to qualify for a home equity loan. A home equity loan can provide a lump sum of cash, similar to a personal loan. The difference between the two types of loans is that one is secured by collateral and the other is not. A home equity loan requires you to borrow against the equity in your home. This can be risky. If you default on a home equity loan, you risk losing your home. Before taking a home equity loan, you should apply for a PPP loan. If you don't qualify for a PPP loan, you should then consider a personal loan before a home equity loan in most cases.

How do I show proof of income if I get paid cash?

In most cases, cash is king, right? That's right, unless you are trying to prove your cash income. If you get paid cash regularly, it's important to keep proper records and report it when you file taxes. If there is no legitimate record of the cash flow, you may not be able to prove cash income. When customers pay you in cash you should give them a receipt. In addition, you should keep a copy for yourself. When you are preparing for taxes you can refer to these receipts to determine what your actual income was. While it may be tempting to pretend as if you did not make as much as you did, it can haunt you if you need to prove income. Even if you have good credit, there are plenty of instances where you may need to prove income.

With the recent pandemic, lenders are especially cautious about who they lend money to. They know many people are in need and will hopefully financially recover, but there is no guarantee. As a result, lenders have been requesting proof of income from good and bad credit borrowers to help them make better loans.

What qualifies as self-employed?

If you are self-employed, you do not work for a company or individual that pays you a set salary or wage. In addition, your clients or payers, will likely not deduct taxes from your pay. Self-employed workers are generally freelancers, tradespeople, salespeople, and more.

What can I spend my PPP loan on as an independent contractor?

Independent contractors are able to use their PPP loan on a variety of things, giving them some freedom and stress relief. However, if they would like to achieve full PPP loan forgiveness, then they need to use a minimum of 60% of the funds to help with payroll expenses. As an independent contractor, this could mean paying yourself. You could even spend up to 100% of the funds to pay yourself if you qualify and follow the rules the right way. This can be difficult though.

Beyond the payroll, there are other expenses that you are able to spend your PPP loan on and still receive the forgiveness. Some examples include:

Utility, rent, and mortgage payments.

Interest on payments on debt that happened before February 15, 2020.

Refinancing an EIDL loan from the SBA that was made in early 2020.

Certain expenses for operating the business such as payments for software, accounting, or delivery costs.

Costs for property damage that relate to a public disturbance in 2020 and were not covered through your insurance.

Covered supplier costs that are essential to your operations.

Costs for worker protection. This can include PPE or other operating expenses that are necessary to keep in line with some of the DHHS, CDC, and OSHA guidelines to name a few.

It is important to research what you are able to use these funds for before you jump in and start spending the money. The point of these loans was to help out companies who struggled during the beginning of the pandemic and needed some help so they did not fail. It was not meant for contractors to use on anything that they wanted.

How do I pay myself with PPP loan independent contractors?

It is possible to get full forgiveness of the PPP loan if at least 60% of the funds are used to pay employees or for other methods of payroll. As an independent contractor, that means that you would need to pay yourself to make this work since you don't have employees. However, there are still some gray areas that are making contractors worried. Some contractors do not have a set payment schedule for themselves and may be wondering how they will prove where the money went. If you took a PPP loan and are an independent contractor you will want to keep a record of cash flows to prove how the money was spent. When it is time for you to request forgiveness, you may find that having a separate bank account for these funds is a good place to start. Keeping business and personal expenses separate is important, especially for bookkeeping.

How do you prove income if you are self-employed?

When you are self-employed, this can provide a lot of freedom when it comes to the way you work, when you work, and the type of projects that you get to take on. However, you will not receive the handy W2 forms that you did at a traditional job, and this can make it difficult to prove your income. If you have been self-employed for a while now, you may have run into a few instances where you needed official proof of income. When applying for a PPP loan or purchasing a home you may need proof of income.

As a self-employed individual, there are a few ways you can prove income. First, you can use your annual tax returns. This is the easiest way to show someone how much you make as a self-employed individual. Your bank statements can also show more about your personal cash flow as well. You may want to consider setting up a separate bank account that is just for your business purposes to make sure you do not miscalculate your income and expenses when applying for loans.

Using an online accounting service can make things easier as well. This helps you to stay on track and will make taxes a bit easier at the end of the. Year. They can even provide you with a profit and loss statement, which you can give to banks and other lenders when necessary.

What counts as proof of self employment?

Some banks and other institutions want to have proof that you are self-employed before they agree to lend money to you at all. This helps to keep them safe and can prevent issues down the line. But how are you supposed to prove that you are self-employed?

Registering yourself as a business entity is a good place to start. This can be done quickly as long as you know the type of business entity you would like to be. Having a business account attached to that and all of the EIN and other relevant paperwork can help. These steps take some time to complete, but will prove that you are self-employed when necessary.

Can I use invoices as proof of income?

Invoicing can be a good way to prove your income, as long as you are invoicing thoroughly and accurately. You will need to provide an invoice and show that it is paid for in order to count it as income. If you can trace that invoice payment back to a line on your business account, you will find that it provides more proof than before.

In the case of providing a product or service to the customer, it is necessary for you to provide an invoice to the client. This should include as many details about the project as possible including the time you spent on the project and how much they owe you. This invoice is going to serve as a proof of income for you and a proof of expense for them if they need it.

There are different things that you should include on the invoice to make it more official. This includes:

The business name and address details.

The name and the address of the company you plan to invoice

A unique invoice reference number that goes just to this invoice and makes things easier.

A date on the invoice.

A list of the services or products that you provided to them as well as the cost of each.

The total amount of the invoice

The terms for paying the invoice

If you can add other information like any telephone and fax numbers and the company email address, this can help as well. It is always best to have more information rather than less to keep things safe here.

Are bank statements proof of income?

If you need to prove your income as a self-employed individual, you may need to provide several documents, including bank statements. Bank statements can help lenders prove that your cash flow is healthy and your business is legitimate. Whether you are self-employed or not, a lender may request to see your bank statements.

If you are trying to use this as a way to prove your income and you are self-employed, then you should consider your own business account. This can keep your personal and your business expenses separate from one another and makes it easier to show where some of the income is coming from at any given time.

Can you get an independent contractor loan with bad credit?

Yes, you can get an independent contractor loan with bad credit. As an independent contractor there are several reasons you may need to borrow money. Perhaps you need to improve cash flow or finance new equipment. These are just a few reasons you may need financing. With bad credit you may have less options available, so it will be important to do your research.

You may be able to qualify for an unsecured personal loan with bad credit. An unsecured loan is one that does not require any collateral. That means lenders can't take your property if you default on the loan. However, if you default on the loan it will definitely lower your credit score. If you have bad credit, you can still qualify for an unsecured personal loan. Your interest rate just may be higher. Most unsecured and secured personal loans have fixed terms. This means the interest rate and your monthly payments will not change during the term.

A variable-rate loan is a loan that has changing rates throughout the loan term. That means it's hard to predict how much you will be paying each month. However, if you are going to pay it off quickly, this may be a good option for you.

Another option you may have is to get a line of credit. This is like a credit card but with lower interest rates. You get a credit line amount and only pay interest on how much of the line you've used. Monthly repayments depend on your balance. A line of credit may be best for ongoing projects or cash flow solutions. However, it may be challenging to get a line of credit with bad credit.

What credit score do I need to get an independent contractor loan?

Luckily, credit scores aren't the only thing that lenders look at when considering to approve an independent contractor loan. They will likely consider other elements too that validate that you can and will repay the loan.

While lenders may consider other factors they may start by looking at your personal credit and or business credit. They may start with a soft credit pull to generate an offer, but will eventually need to do a hard credit pull most likely. Most lenders are looking for a score in the mid-600's but some financing options are flexible.

Another thing they may look at is how long you've been in business. Most lenders want to finance businesses that are at least two years old. You can find exceptions but your options will be more limited. You can use your date of incorporation, the date you received your Employer Identification Number (EIN), your business license, or the date you filed a fictitious name as proof of your start date.

Lastly, lenders look at revenues. You need to prove that your business is making enough money that you can pay back the loan. You may have to show business tax returns or business bank statements.

If you can't qualify for an official business loan, you may need to use a personal loan.

What is the minimum credit score to get financing as an independent contractor?

Minimum credit score requirements can vary depending on the lender and type of loan. Some lenders may have a minimum credit score requirement of 600, while others may have a higher, or even lower, minimum credit score requirement. You should start by checking your credit score. Next, find a lender that you can meet most or all of the requirements for.

Can you get an independent contractor loan with a 600 credit score?

If you have a FICO score of 600, it may be difficult to get an independent contractor loan. You may need to consider a personal loan. Personal loans can be used for business use. Until your business is well-established, it may be difficult to get an official independent contractor or business loan. A personal loan may provide you with the funds you need to grow your business. When qualifying for a personal loan, lenders may look at other factors in addition to your credit score. As an independent contractor you may need tax returns to prove your income. If you are a new independent contractor you may not have tax returns yet which can complicate the process. Some lenders may accept bank statements. Regardless of how you prove it most lenders will want to see some documentation for proof of income.

What lenders provide financing for independent contractors with bad credit?

If you have bad credit, your best option for an independent contractor loan is probably a personal loan. If you have a well-established and successful business with lots of assets, you may be able to secure an official independent contractor loan, but not all of us are in this stage of the game yet. Oftentimes when you apply for an independent contractor loan, your personal credit will be evaluated. Just like any other bad credit loan, you may have to pay high interest rates with bad credit.

A high interest rate may cost your business thousands of wasted dollars. While you may have a vision that you are chomping at the bit to bring to life, improving your credit score may be a vital first step toward securing an independent contractor loan. You should check your credit score and report to identify easy ways that you could improve your credit in the short term. Even if you only improve your credit score by 20 or 30 points, this can make all the difference when it comes to taking out a loan. You will want to check with the lender of your choice to find out what their minimum credit score requirement is before applying. At Acorn Finance we have a wide variety of lenders that can help most borrowers qualify for a personal loan. Some of our lending partners include:

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SoFi

OneMain Financial

Axos Bank

Lending Point

Best Egg

How to get financing as an independent contractor with bad credit?

Self-employed individuals can face a lot of challenges trying to get small business loans, especially if they have bad credit. Even those with good credit can face roadblocks. When you're not self-employed, you can expect a consistent paycheck. This makes it easier to qualify for loans. But when you're self-employed, it can be harder to qualify because your business may not be consistent. One option is to apply at a bank or credit union. However, they are usually looking for borrowers who are extremely qualified, and it is a long process.

You can also use a business loan broker who will help you find financing through a bunch of different sources. Be careful and only use business loan brokers with good reviews and reputations. You can ask around and see who other businesses used. That is because some brokers are just trying to make a profit. You can also apply directly to lenders that offer specific products. This can get you a specific type of financing. Lastly, go through an online marketplace that will match you to a multitude of loan options based on your prerequisites. This lets you learn about different loan options and shop around to find the best loan for you.

What is considered bad credit when looking for financing as an independent contractor?

When it comes to a loan for independent contractors, there are several factors that matter on top of your credit score. You can use the general rule of thumb that if your FICO score is between 300 to 629, it's going to be labeled as bad by most lenders. If your credit is in the good range of 690 to 719, you should have a much better chance at qualifying for a loan. There's also the fair credit range of 630 to 689. If you are in this range you may qualify for an independent contractor loan but if possible you should get to the good credit range before applying.

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