Best Business Loans for the Self-Employed and Sole Proprietors From Our Partners
Best Business Loans for the Self-Employed and Sole Proprietors From Our Partners
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Max loan amount
$100,000
Min. credit score
625
Est. APR
35.90-84.90%
Pros
- Fast access to working capital.
- Accepts borrowers with a minimum credit score of 625.
- Streamlined application process with minimal documentation required.
- Can be used to build business credit.
Cons
- Not available in North Dakota.
- May require frequent weekly payments.
- Interest rates can be high compared with traditional lenders.
OnDeck - Line of credit
Best for Working capital needs
Max loan amount
$100,000
Min. credit score
625
Est. APR
35.90-84.90%
Pros
- Fast access to working capital.
- Accepts borrowers with a minimum credit score of 625.
- Streamlined application process with minimal documentation required.
- Can be used to build business credit.
Cons
- Not available in North Dakota.
- May require frequent weekly payments.
- Interest rates can be high compared with traditional lenders.
Max loan amount
$1,500,000
Min. credit score
570
Pros
- Cash can be available quickly.
- Get a discount for prepaying.
- No collateral required.
- Low minimum credit score requirement.
Cons
- Charges a factor rate that makes it more difficult to compare costs with other lenders.
- Can’t build business credit.
- Longest loan term is 18 months.
- Charges an origination fee.
Fora Financial - Online term loan
Best for Bad credit
Max loan amount
$1,500,000
Min. credit score
570
Pros
- Cash can be available quickly.
- Get a discount for prepaying.
- No collateral required.
- Low minimum credit score requirement.
Cons
- Charges a factor rate that makes it more difficult to compare costs with other lenders.
- Can’t build business credit.
- Longest loan term is 18 months.
- Charges an origination fee.
Giggle Finance - Merchant cash advance
Best for Freelancers and independent contractors
Max loan amount
$10,000
Min. credit score
300
Pros
- No minimum credit score requirement.
- Same-day funding available.
- Specifically designed for freelancers and self-employed individuals.
Cons
- Funding maxes out at $10,000 ($20,000 for repeat customers).
- Factor rate and fee information not available on website.
- Charges an origination fee.
Giggle Finance - Merchant cash advance
Best for Freelancers and independent contractors
Max loan amount
$10,000
Min. credit score
300
Pros
- No minimum credit score requirement.
- Same-day funding available.
- Specifically designed for freelancers and self-employed individuals.
Cons
- Funding maxes out at $10,000 ($20,000 for repeat customers).
- Factor rate and fee information not available on website.
- Charges an origination fee.
Accion Opportunity Fund Small Business Working Capital Loan
Best for Traditionally underserved borrowers
Max loan amount
$250,000
Min. credit score
600
Est. APR
8.49-24.99%
Pros
- Loan amounts from $5,000 to $250,000.
- Customized loan terms.
- No prepayment penalty.
Cons
- Slower processing speed compared with online lenders.
- Charges an origination fee.
- Not available in all U.S. states.
Accion Opportunity Fund Small Business Working Capital Loan
Best for Traditionally underserved borrowers
Max loan amount
$250,000
Min. credit score
600
Est. APR
8.49-24.99%
Pros
- Loan amounts from $5,000 to $250,000.
- Customized loan terms.
- No prepayment penalty.
Cons
- Slower processing speed compared with online lenders.
- Charges an origination fee.
- Not available in all U.S. states.
SBA microloan
Best for Startups
Max loan amount
$50,000
Min. credit score
620
Est. APR
8.00-13.00%
Pros
- Can be used for a variety of funding purposes.
- Designed to finance traditionally underserved businesses.
- Startups and business owners with bad credit may be able to qualify.
- Competitive interest rates, low fees and long repayment terms.
- Intermediaries typically offer business training and educational resources.
Cons
- Loan amounts max out at $50,000.
- Can’t be used to pay existing debt or purchase real estate.
- Collateral is likely required.
- Slow funding timeline.
SBA microloan
Best for Startups
Max loan amount
$50,000
Min. credit score
620
Est. APR
8.00-13.00%
Pros
- Can be used for a variety of funding purposes.
- Designed to finance traditionally underserved businesses.
- Startups and business owners with bad credit may be able to qualify.
- Competitive interest rates, low fees and long repayment terms.
- Intermediaries typically offer business training and educational resources.
Cons
- Loan amounts max out at $50,000.
- Can’t be used to pay existing debt or purchase real estate.
- Collateral is likely required.
- Slow funding timeline.
Bank of America Business Advantage Unsecured Term Loan
Best for Established self-employed business owners
Max loan amount
Undisclosed
Min. credit score
700
Pros
- Bank loan with competitive interest rates.
- No collateral required.
- Bank of America’s Preferred Rewards program can offer interest rate discounts and other perks.
Cons
- Can be slow to fund.
- Prepayment fees may apply to early repayments.
- Must be an existing Bank of America customer to apply online.
- Charges an origination fee.
Bank of America Business Advantage Unsecured Term Loan
Best for Established self-employed business owners
Max loan amount
Undisclosed
Min. credit score
700
Pros
- Bank loan with competitive interest rates.
- No collateral required.
- Bank of America’s Preferred Rewards program can offer interest rate discounts and other perks.
Cons
- Can be slow to fund.
- Prepayment fees may apply to early repayments.
- Must be an existing Bank of America customer to apply online.
- Charges an origination fee.
SBA 7(a) loan
Best for Large loan amounts
Max loan amount
$5,000,000
Min. credit score
650
Est. APR
10.50-14.00%
Pros
- Large borrowing maximums.
- Interest rates are capped.
- Long repayment terms available.
Cons
- Collateral is typically required.
- Longer processing times than online lenders.
SBA 7(a) loan
Best for Large loan amounts
Max loan amount
$5,000,000
Min. credit score
650
Est. APR
10.50-14.00%
Pros
- Large borrowing maximums.
- Interest rates are capped.
- Long repayment terms available.
Cons
- Collateral is typically required.
- Longer processing times than online lenders.
Where to get business loans for sole proprietors and self-employed individuals
In general, self-employed individuals, such as sole proprietors and independent contractors, can access the same types of business loans as larger companies — provided they have proof of steady income.
Financing is available from:
Banks and credit unions
Banks and credit unions typically offer the lowest interest rates and most competitive repayment terms. These lenders can provide a variety of financing options, including both term loans and lines of credit.
Business term loans are often used for one-time investments in your operations, whereas business lines of credit are better-suited for ongoing cash flow needs. Some banks may also offer industry-specific funding, such as medical practice loans.
To qualify, however, you’ll likely need at least two years in business and good credit (often a score of 700 or higher). Some banks may also require you to secure your loan with physical collateral, such as equipment or real estate.
SBA lenders
SBA loans are issued by participating lenders, like banks and credit unions, and partially guaranteed by the U.S. Small Business Administration. The most popular SBA loan, the 7(a) loan, offers funding up to $5 million and repayment terms up to 25 years.
SBA 7(a) loans can be a good option for purchasing equipment, making renovations, expanding to a new location and buying inventory or supplies, among other uses. Although these loans may be slightly easier to qualify for than bank loans, you’ll still need good credit and finances to get funding.
Online lenders
Online lenders can be a good option for those who can’t qualify for bank or SBA loans, as well as for those who want financing quickly. These lenders offer streamlined applications with minimal documentation and may fund applications in as little as 24 hours.
Online lenders typically have lenient qualification requirements and may be able to work with startups or borrowers with bad credit. As a result of their speed and flexibility, however, online lenders often charge higher interest rates and offer shorter repayment terms.
Nonprofit and community lenders
Nonprofit and community lenders usually focus their lending efforts on traditionally underserved businesses, such as those owned by women, minority groups or veterans. These lenders have flexible qualification requirements, but still offer competitive interest rates and repayment terms.
Some lenders also participate in the SBA microloan program, which offers loan amounts up to $50,000. Nonprofit and community lenders can be a particularly good option for self-employed individuals who are looking for business training — in addition to funding. Many of these organizations provide business training and coaching, among other resources.
Merchant cash advance companies
Merchant cash advance companies provide you with an upfront sum of capital that you repay using a percentage of your debit and credit card sales, plus fees — otherwise known as a merchant cash advance, or MCA. MCAs are usually fast to fund and easy to qualify for, but can be expensive, with APRs reaching triple digits.
Merchant cash advances are typically used by businesses that bring in significant credit and debit card sales. Generally, however, you’ll want to consider all other options before turning to an MCA.
How to get a business loan if you’re self employed
Self-employed individuals are typically held to the same lending standards as more established businesses, which can make the loan application process difficult.
From a lender’s perspective, self-employed business owners are often riskier to fund compared to employer-based businesses. For sole proprietorships or partnerships, there’s no legal separation between the business owner and the business itself. As a result, the business owner’s personal assets could be at a greater risk if their business is sued or runs into financial trouble. This may hurt their ability to make loan payments on time, even if they meet the lenders’ requirements.
To put yourself in the best position to get a self-employed business loan, keep these tips in mind:
Show consistent revenue
Although lenders will also consider your personal credit and time in business when evaluating your loan application, it’s particularly important to show consistent revenue as a self-employed business owner. Lenders want to feel confident that you’ll be able to repay your debt. To help illustrate your revenue, you may need to provide:
- Personal and business bank statements.
- Tax forms, with Schedule C and SE included.
- 1099 forms.
- Business financial statements, such as balance sheets, profit and loss statements and cash flow statements.
Bolster your loan application
You can improve your loan application by offering collateral, a down payment or adding a cosigner. Offering collateral or a down payment, especially when it’s not required, can help make your application more attractive to lenders.
Similarly, adding a cosigner can give the lender additional security that someone will repay your debt in the case of default. Typically, you’ll want to add a cosigner that has strong credit and personal assets.
Compare multiple lenders
You should research and compare multiple lenders to determine which company can give you the best offer. You’ll want to consider factors such as maximum loan amounts, interest rates, repayment terms, funding speed and application process.
You may also want to refine your search to look for lenders that work specifically with freelancers and independent contractors. Working with one of these companies, like Giggle Finance, for example, may increase your chances of approval.
Utilize expert resources
As a sole proprietor or self-employed business owner, it can be difficult to manage loan applications while running your business. Local business organizations can assist you through the process, often at little or no cost. Professionals at these organizations can help you prepare your financial statements and other application documents, answer questions and provide additional resources.
Alternative funding options for self-employed individuals
Here are some alternative financing options that sole proprietors and self-employed individuals might consider for their businesses:
Business credit cards
A business credit card is a simple way to quickly unlock a small amount of financing and can help you establish a business credit history to qualify for larger loans in the future. Credit limits, interest rates and annual fees on business credit cards can vary depending on each applicant's credit history. Like personal credit cards, some business credit cards offer rewards such as cash back, 0% APR introductory periods or travel points and miles.
To apply, you’ll need information about your personal finances since you may have to personally guarantee the debt. Be prepared to provide the details about your business, too, including the legal structure, estimated monthly spending and employer identification number.
Personal loans
Personal business loans can be a solid source of funding for self-employed individuals who haven’t been in business long enough to qualify for a business loan, want to avoid online lenders’ high interest rates or lack the collateral to secure a business loan.
You can qualify for a personal loan based on your credit score and income. If you can’t repay one of these loans, however, your personal credit and assets will be at risk. Additionally, traditional business loans usually offer larger loan amounts and longer repayment terms than personal loans.
Crowdfunding
If your business has a large online or social media presence, crowdfunding can be a good way to get capital. With crowdfunding, you create a campaign on an online platform and interested individuals can donate to your business. Typically, you offer a reward (e.g. exclusive products, access to events) or equity in exchange for these donations.
A successful crowdfunding campaign requires active maintenance, however, and online platforms may take a cut of your proceeds.
Additional resources for self-employed business owners:
Last updated on September 4, 2024
Methodology
NerdWallet’s review process evaluates and rates small-business loan products from traditional banks and online lenders. We collect over 30 data points on each lender using company websites and public documents. We may also go through a lender’s initial application flow and reach out to company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
Our star ratings award points to lenders that offer small-business friendly features, including:
- Transparency of rates and terms.
- Flexible payment options.
- Fast funding times.
- Accessible customer service.
- Reporting of payments to business credit bureaus.
- Responsible lending practices.
We weigh these factors based on our assessment of which are the most important to small-business owners and how meaningfully they impact borrowers’ experiences.
NerdWallet does not receive compensation for our star ratings. Read more about our ratings methodology for small-business loans and our editorial guidelines.
Wondering if you qualify?
It’s possible to get a business loan even if you have bad credit. Bad-credit business loans are available from alternative sources, like online or nonprofit lenders.
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