Although it is not always wise to try to get a small business loan if you are self-employed, there are some really good reasons that can help expand your business.
If You Are Just Starting Out
When you first begin your business is when you will likely have greater expenses than income. You may need to secure your lease for your office or warehouse space. You will need to hire and retain good employees. You will likely need your initial inventory and equipment. All of these are legitimate reasons to seek self-employed loans. You want to give your business its initial boost in a startup. You likely do not want to invest your personal savings in these startup costs.
Online Lenders Have Created Fewer Hoops to Jump
One big advantage that online lenders have for the self-employed is that you do not have to jump a bunch of hoops to get the loan. According to Nerdwallet, traditional banks tend to expect collateral before they provide you a loan. Many people do not want to put their home or car at risk for a small business loan. Online lenders, depending upon your credit and liquidity, tend to be less inclined to require collateral to provide loans.
Also, Nerdwallet states that traditional banks have an incredible amount of paperwork they require before they will issue you a loan. They will ask for personal bank statements, your business plan in writing, your tax returns, financial statements and/or financial projections and copies of your licenses and permits, leases and contracts.
Online lenders will look at your credit score and your tax returns. They usually will not need more information, unless you have a poor credit score.
According to Entrepreneur Magazine, one really great reason to take out an online small business loan is to build business credit. During the Great Recession, it was really tough for small businesses to get loans of any kind for the first four years. Indications are we are about to enter a new recession. If you don’t have much of a business credit record, you will be less to get credit when the recession hits. If you build business credit now, you will more likely have access to it later when you need it.
Sadly, during the Great Recession, many business owners resorted to using business credit cards to fund their enterprise. These credit cards are averaging around 15 percent interest currently. At such a high rate of interest, it gets really tough to pay them off, especially in a slow economy. Also, servicing such high interest doesn’t leave much cash flow available.
Expansion of Facilities
Another great reason to take out an online small business loan is if your business is humming along so powerfully that you are busting at the seams physically. Maybe you need a larger retail location or more office space to accommodate more employees.
As we have seen recently in the news, it may not be wise to trust a middle-man provider of coworking space because many such businesses are new and unproven. Also, you may not have as much control as you would like about what is going on in a coworking space provided by a middle man. Instead, it is likely best to lease your own larger space for your operations and have everyone in your team under one roof.
An online small business loan can help you get your enterprise into a suitable facility that is not too cramped.
Whether you are in your initial startup phase, building business credit or expanding your physical space for your enterprise, online self-employed loans provide a streamlined application and acceptance process that allows small business owners to have quick access to credit when needed.