Freelancers are often seen as an underserved demographic when it comes to personal or business financing loans. After all, without a consistent paycheck, lenders will look at a freelancer as a riskier investment. That being said, it’s getting increasingly easier to access financing lending as a freelancer.
Of course, getting a home-based business loan is easier in some places than in others. However, in many developed economies, lenders have adjusted to a rapidly growing demographic of freelancers and informal work and business arrangements.
Let’s see some examples.
Freelance Financing in the US
The US serves as a good baseline example for the lending industry as it operates around the world.
Freelancers can often qualify for their choice in either personal or business loans. Personal loans are a simpler matter, but business lenders assess freelancers in a very similar way. They want to look at your financial history and current income, They already understand that freelancers’ incomes are unstable, so they employ more complex mathematical processes to offer mutually agreeable rates and terms.
How to Qualify for Business Loans in the US
Normally, it doesn’t matter whether a business has one employee (a single freelancer) or more. Lenders normally offer business loans to freelancers working under their own LLC.
As long as you meet the broader requirements that a lender has, you should qualify through your business entity.
If you don’t have a business entity already, that’s fine! Some US states are globally notorious for how cheap and easy they make it to open a business. US citizens and often non-resident citizens of other countries can quickly open an LLC. Much of the process can be completed online, and your private home or any qualifying mail address should suffice.
Make sure you look into the specific requirements of the state in which you live or would like to open a small freelancing business. For example, states like Delaware and Wyoming are well-known for the ease of starting an LLC there. However, other states like Connecticut and Rhode Island make it much more difficult.
American Business Loans to Choose From
Some freelance businesses can qualify for a SBA microloan. SBA loans known to be both massive and more difficult to qualify for. But freelancers working through their own LLCs can apply for SBA microloans of up to $50,000.
Apart from SBA loans, there are limitless other small business lenders in the US. Banks may be more hesitant to offer business loans to individually run LLCs. But they can always offer personal loans or lines of credit, which you can use for business purposes.
There are numerous alternative lenders in the US, and it’s easy to find the right loan for you.
You can find individual lenders through online or in-person community recommendations. There are many lenders available to you, so it’s good to explore your options before signing an agreement. Another easier way to do this is to use a lending comparison platform. There, you just provide some simple information and then you’re automatically matched with the best lending product their partners can offer you.
Compared to other US business lending situations, freelancers will still be limited. Most business loans are for small businesses with large expenses. Those businesses borrow to cover payroll, new equipment, real estate, and other pricy purchases. As a freelancer with an LLC in the US, you will mainly qualify for microloans.
Compared with personal loans, business microloans are harder to obtain but are less linked with your individual social security. You often have some legal protections as a business entity that you do not as a personal borrower. So, business microloans generally present less risk in addition to lower rates.
Freelance Financing in Europe
Freelance financing is different everywhere. However, most freelancers with business entities can access business loans.
UK
In the UK, freelancers can face some challenges but generally should have access to “self-employed” loans. In general, the British financial system is supportive of self-employed workers, and there are government-backed Start Up loans. However, you can expect lenders to look more closely into your financial records and personal credit score. Lastly, UK loan comparison platforms can help you narrow down the best loans for which you can qualify.
Sweden
Swedish lenders are often more cautious lending to egenföretagare, or freelancers. Banks will be more hesitant, unless you can produce good financial records from the last two or three years. A longer history in self-employed activities makes it much easier to qualify for business loans. You may be able to find some freelancer-friendly (or even freelancer-only) credit unions. But keep in mind that having a local enskild firma (sole trader) or aktiebolag (limited company) massively improves your access to financing overall.
Norway
Norwegian freelancers are in a similar position to their counterparts in other European countries. In some cases, freelancers with a sole proprietorship (enkeltpersonforetak) or private limited company (AS) still face harsh barriers to business loans. There are some grant and loan options from Innovation Norway and other organizations. It’s generally easier to use lending platforms or any method that casts a wide net.
Denmark
In Denmark, freelancers and the self-employed overall can access business loans with a personligt ejet mindre virksomhed (sole proprietorship) or ApS (private limited company). You can expect to be required to present two years worth of financial information. It’s normal to have to sign a personal guarantee as well.
Holland
In Holland, freelancers (zzp’ers) without a BV can find it difficult to qualify for business loans from banks. The rules are normally similar to those of financial institutions around Europe: two years of good income.
Other Locations
Around the world, options are opening up for business owners of all kinds, including many freelancers.
In South Africa, startups and lending platforms are expanding access to those with a Pty Ltd. Similar to Europe, however, banks will want to see a few years of solid financial history.
New Zealand and Australia’s freelancer business lending spaces more closely resemble the US market. In Australia and New Zealand, freelancers can much more easily access small business loans.
Might as Well Try
If you’re a freelancer and want to borrow money, you might as well try. More and more lenders understand the needs of this rising demographic. In countries where banks may erect more barriers to business loans, alternatives exist. In any case, there is no reason for a freelancer to hesitate when it’s so easy to compare options quickly without any commitment.
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