The number of self-employed workers in the UK has risen dramatically in recent years and there were over 5 million registered by the fourth quarter of 2019 – up from 3.2 million back in 2000. The self-employed have contributed heavily to employment growth in the labour market with people working for themselves now representing as much as 15.3% of the British workforce.
Those that are self-employed might find that they struggle to get approved when looking for a loan, which could have an impact on both their personal and professional lives. The main reason that self-employed workers often struggle is that their income may fluctuate each month, which can put off lenders looking for more stable income.
But that does not mean that self-employed workers should give up hope when searching for a loan. Here, we will examine some of the different types of loan products that could give the self-employed a chance to secure extra finance.
Options for Self-Employed Workers
Personal loan: These can be highly flexible, with different rates of interest available depending on credits report and other factors. It may be possible to get approved for a long-term loan if the applicant can show that their income will remain stable during the repayment period. Improving credit scores will also boost chances of being accepted for a more traditional loan.
Business loan: Business loans can be used to grow and support a business. A lender will make a decision based on business accounts, to determine if the owner could afford to make repayments. Making sure financial statements are well up to date before applying is crucial, as having gaps in the books could delay the process, or even lead to applications being turned down.
Guarantor loan: A guarantor loan is a useful option for those struggling to secure a personal loan. A co-signee and will become responsible for making payments if the lead applicant is unable to. Selecting a guarantor in a strong financial position will help the chances of being approved.
Secured loan: Another option is a secured loan where the money will be secured against an asset, such as a home or vehicle. Keep in mind that the lender can pursue the applicant for this asset if repayments are not kept up with, so these products should never be taken out without fully considering how they could impact the future.
Bounce back loan: If a business has been affected by Covid-19, then it could be possible to get approved for a bounce-back loan, which provides small businesses with between £2,000 and 25% of their turnover with the Government guaranteeing 100% of the loan.
