Self-employed people are likely accustomed to having to pass through a few more financial hurdles. It’s the same process when applying for a loan. A sole proprietor or freelancer may need to provide additional evidence to the lender to demonstrate the consistency of their earnings.
In this post, we will be walking you though some of the loans available for people who are self-employed and some other important information. This article covers all you need to know about loans for self-employed in Ghana.
Who is considered Self-employed?
According to The Economic Times the definition of “self-employed,” is a person who works for themselves rather than for a specific employer earns their living through contracts with businesses. Because they frequently work for multiple employers, they do not receive stable salaries or pay from any one company.
Self-employed people may engage in a range of professions, but they typically have a high level of expertise in one particular field.
Eligibility Criteria for Loan for Self-employed
- You must be a self-employed professional or unemployed.
- At least 21 years of age is required.
- A minimum credit score of 750 or higher is required.
- Your yearly income must meet the bank’s eligibility requirements.
- Your company should have been operational for at least two years.
- properly completed application form and two passport-sized photos
- ID documentation, such as an Aadhaar card, PAN card, voter ID card, driver’s license, or passport
- Ration cards, utility bills (such as phone and electricity bills), voter identification cards, PAN cards, and other documents serve as address proof.
- Business evidence which includes a certificate of incorporation, proof of business existence, and proof of registration with the appropriate registration body.
- Income Proof: Certified Profit and Loss Statement, ITR for the Past Two Years
any other paperwork that the bank may require
Types of loans for self-employed
For self-employed individuals who haven’t been in company long enough to be eligible for a business loan, want to avoid the exorbitant interest rates charged by internet lenders, or don’t have enough collateral to receive a business loan, personal loans can be a reliable source of finance. However, keep in mind that business loans frequently provide longer loan periods and greater loan amounts.
You might have thought of requesting a small-business bank loan if you need to borrow a specific sum of money to pay for business expenditures. You’ll likely need to have been in business for a while and have strong or great personal credit to qualify.
Lenders could still ask you for a personal guarantee. You can be responsible for the debt personally if your company fails. Other creditors require borrowers to put up collateral such as real estate or take liens on company assets so they can seize them if the loan is not repaid.
Business credit cards
A business credit card is an easy method to get access to a small amount of funding fast, and it can also help you build a business credit history so that you can be approved for bigger loans in the future.
Depending on each applicant’s credit history, credit limits, interest rates, and yearly fees can change for business credit cards. Some corporate credit cards offer perks like cash back, introductory 0% APR periods, or travel points and miles, just like personal credit cards do.
Small loans known as SBA microloans are made by community-based nonprofit lenders and are supported by the SBA. Microloans are typically easier to apply for than term loans or lines of credit because the program is meant to help business owners who would struggle to qualify for standard business loans.
With a minimum of six months in company and a personal credit score of 600 or higher, borrowers may be able to qualify for an online loan, which frequently has less stringent standards than bank or SBA loans.
This sort of financing, nevertheless, is typically more expensive and could have a shorter repayment period. All things considered, this kind of funding may be a suitable option for companies that don’t qualify for bank or SBA loans or that require funds right away.
Business lines of credit
A business owner can use a line of credit, similar to a credit card, to borrow money as needed and make payments over time for expenditures. A line of credit can be used to make investments that will help your business develop or to help you overcome seasonal problems with cash flow. Lenders only charge interest on the amount that is borrowed.
Credit lines typically have higher limitations than credit cards do. They are more difficult to qualify for though; you generally need several years of proven company experience.
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