Self employed loans for businesses

Discover the options available for self employed loans, how much you can borrow, eligibility criteria, necessary documents, and tips to maximise your chances of a successful application.

Smiling small business owner in a workshop looking at his phone while holding a pencil, with icons of a stopwatch and money symbolising time and financial management.

Is it possible to get a loan as a sole trader or self employed person?

Self employed individuals, including sole traders, can get access to loans for their business. However, the process and what you need to provide can be quite different from traditional business loans. You’ll likely need to show more documentation to prove your income is stable enough for a loan. This could include your personal and business bank statements, profit and loss statements, tax returns, and sometimes even a detailed business plan. Lenders look at this information to assess your application and to make sure you can pay back the loan, especially since self employed incomes can vary a lot.

How do self employed loans work?

Self employed loans are designed to meet the financial needs of individuals who run their own businesses or work freelance. As with any other business loan, you'll borrow a sum of money and repay it, plus interest, over agreed-upon terms. How they work will depend on the type of self employed loan you opt for.

What types of self employed loans are available?

Different types of self employed loans that cater to different business needs. Each of the following loan options helps self employed individuals manage their finances, ensuring their businesses run smoothly and grow:

Small business loans

A small business loan is a versatile option for self employed individuals. Whether starting or expanding, a business loan provides necessary funds without needing a specific setup. These loans offer flexible terms and competitive rates, making them a solid choice for many self employed professionals.

Merchant cash advance

If you run a store or a café and a significant part of your income comes from credit or debit card sales, a merchant cash advance could be an excellent option. With this type of loan, you receive cash upfront to cover expenses like inventory and equipment. You then repay the advance with a fixed percentage of your daily card sales, meaning your repayments fluctuate with your revenue. This flexible repayment plan ensures you pay less when your business is slower.

Asset finance

Asset finance is ideal for businesses that require heavy equipment, such as builders or landscapers needing diggers, or tractors. With asset finance, instead of paying a larger amount upfront, you spread the cost over time, which can help keep your cash flow steady.

Car or van finance

For businesses that rely on reliable transportation - such as delivery drivers or mobile pet groomers, vehicle finance provides a manageable way to pay off a car or van in instalments.

This option helps you cover significant expenses gradually, ensuring your business can continue operating smoothly without a large financial burden at once.

Invoice finance

Ideal for businesses that operate on invoice terms, such as freelance graphic designers or consultants. Invoice finance lets you borrow money against the amounts due from clients, giving you access to funds faster instead of waiting for them to pay.

What can you use a self employed loan for?

Self employed loans can be used for various purposes, including:

  • Business expansion

  • Buying inventory or equipment

  • Handling operating costs during slow seasons

  • Funding marketing efforts

  • Smoothing out cash flow variations

What do you need to apply for a self employed loan?

Each lender will have different requirements. To apply for a self employed loan, you’ll usually need to provide:

  • Identification and proof of address

  • Bank statements from the last two years

  • Information about your business like its structure and financial health

What are the advantages and disadvantages of a self employed loan?

  • Advantages of self employed loans

    • You can use the money for many business needs like expanding, buying supplies, or smoothing out cash flow.

    • These loans often have flexible repayment terms that match up well with the ups and downs of your business income.

  • Disadvantages of self employed loans

    • Loans for self employed often come with higher rates due to the perceived risk of fluctuating business income.

    • Borrowing means owing money, which can be tough if your business doesn’t grow as expected.

Are there any other funding options?

If a self-employed loan isn't the best match for you, there are other options you could explore to fund your business.

You could look into grants available in your area. If you qualify, this could be a great option as you don't have to pay the money back, giving you a financial boost without any debt.

Borrowing money from family could also work, as they might offer you more flexible terms. A personal loan is another option if the terms are good for your business needs.

And if you're thinking about setting up a limited company, start-up loans could be something to consider.

Apply for a self employed loan with Capitalise

Frequently asked questions