Are you self-employed and you currently need financing? Borrowing money as a self-employed person can be very difficult. Your main concern is how to secure a loan quickly. Banks often do not provide financing if your company does not meet strict conditions, or demand an enormous amount of collateral in exchange for the loan.

You can borrow from private individuals but this route can be difficult and they often charge a high-interest rate. So how can you best approach borrowing money for a sole trader business?

Getting A Loan When You Are Self Employed

The current labor market

The labor market has changed considerably in recent years, a permanent contract for an indefinite period has almost become an exception. Employers do not easily give a permanent contract.

Partly as a result of this, the number of freelancers has grown explosively in recent years. Currently, there are more than 1.3 million self-employed people in the Netherlands and this number grows between 40,000 and 50,000 annually.

Banks are often very reluctant to lend money to freelancers due to the unpredictable income. In addition, not all self-employed entrepreneurs have a safety net if they become incapacitated for work or are temporarily out of work.

Borrowing money as a self-employed individual, what are the options?

If you want to borrow money as self-employed, it is important that you are at least 25 years old and that your business is registered with the Chamber of Commerce. There’s a multitude of options available for you. Let’s take a look at the three most common loans available for self-employed individuals.

Microfinance

A good alternative if the bank does not want to lend you money is to take microfinance as a sole trader. This means that you then take out a business loan of a maximum of 50,000 euros. Conditions apply for this. You must be at least 18 years old, living within the area where you are taking the loan, and you must be able to present a clear business plan.

Innovation credit for the self-employed

Do you have an interesting and innovative idea like energy-efficient devices? If your idea has a lot of potentials, but you do not have the necessary financial resources to implement your idea, an innovation credit can offer a solution. As a (starting) self-employed person you can apply for this credit type of credit starting with local banks near you or you may contact your local state government for more information on this type of funding. Investigate further as to which banks provide this type of financing.

There is a chance that the application will not be processed, but if you make a thorough preparation and have done good market research, it is more likely that your application will be approved. A good business plan is essential. After a thorough evaluation of your plans, the Central Government will decide whether or not you can get a loan.

Crowdfunding for the self-employed

Since the rise of social media, crowdfunding has become very popular as a form of financing for starting companies. More and more successful companies are succeeding in achieving exponential growth with the help of this peer-to-peer funding.

Crowdfunding can offer a solution if you as a self-employed person need a relatively large sum of money for your company within a short period of time and there are no banks or lenders who want to lend you money.

When there is a high demand for your product or service from the population, there are probably a large number of people who are interested in the development of your product or service.

These people will gladly offer financial support to your company. In this way, you ask the public to finance your project through various platforms.

Conclusion

Borrowing money as a start-up entrepreneur can be a serious challenge. To become a successful self-employed person you must have a healthy dose of knowledge, expertise, courage, perseverance and often financing to be able to start or grow.

Many business financiers only give credit to companies that have a certain amount of revenue per year. So often not feasible for the self-employed. Fortunately, there are several options that you can use. Investigate, contact the right people, and start your business today.