Loan for self-employed from private: when banks say no
Self-employed people can sing a song about it. Getting a loan from banks is often an obstacle course. Commercial loans are less of a problem, especially if such loans can be embedded in public funding and/or the company has been going well for years.
But bank loans for the self-employed for private use (a personal loan for the self-employed) are often a real challenge or not possible at all. Credit exchanges on the Internet have tackled this problem under the motto “Loan for self-employed from private”.
Loans for small businesses, young self-employed and start-ups
They promise loans for the self-employed in areas where bank loans are difficult or impossible to obtain, for example:
Loans for smaller amounts, for example, to finance smaller investments. Loans for private purposes, for example for a car used only for private purposes.
Read about how credit exchanges differ from banks when it comes to lending, whether the self-employed can actually benefit from it and what the conditions for loans for the self-employed look like from a private person.
Loan for the self-employed: the problems of the banks
Lending is part of the core business of banks but is also subject to a special challenge: the assessment of the credit default risk.
For employees, it is relatively easy to find out based on the type and duration of the employment relationship and the regular income whether a loan can be properly serviced in the future or not. And above all: the creditworthiness check can be largely automated and is neither labor-intensive nor time-consuming.
In addition to the usual evaluation of data from the credit bureaus and the score values determined, for example, by Credit Checker, it is sufficient to determine the freely disposable income on the basis of a household bill or on the basis of estimated values.
In the case of the self-employed, on the other hand, the credit check involves significantly more work and also costs more time.
Self-employed people are often wondering why a personal loan is so complicated for them. You have some assets, you own your own home, an overdraft checking account, no credit card debts, a clean Credit Checker, and yet some banks are graceful when it comes to lending.
The reason lies in the risk profile that banks create especially for certain independent professional groups. The problem begins with the treatment of independent professional groups by Credit Checker and other credit bureaus.
Credit Checker develops special score tables for various independent professional groups, for example for freelancers and small businesses.
The credit risk across all score levels tends to be rated higher for all self-employed than for employees. While freelancers still get away relatively well, small businesses are particularly hard hit.
Among other things, this leads to the fact that some direct banks only grant loans to freelancers, not to traders and certainly not to small traders. Another difficulty is the nature of self-employment. Unlike employees, banks believe that income is not reliable and regular.
This makes it difficult to forecast future economic performance
The lack of predictability is a problem, especially for self-employed people who have not been in the job for long. But there are also other uncertainties.
The self-employed have no contract that regulates the amount of income. Your income is variable. It can develop well or badly in the future. Miscalculations can lead to a drop in income. How continuous an income can depend on the industry and whether the industry is vulnerable to crises or not.
Gastronomy is often cited as an example. No matter how good an income, a restaurateur will find it more difficult to borrow for private purposes than, for example, a less earning doctor.
The risk assessment of banks when lending to the self-employed is based on the individual lending guidelines of the respective bank.
In general, self-employed people who have successfully worked in their profession for a long time have better chances than starting a business or even starting a business.
The duration of successful self-employment is sometimes more important than a particularly high income that is achieved by a self-employed person who has only been in his profession for a year or two.
Which evidence is required for the risk assessment differs from bank to bank and depends on both the profession and the credit volume. The following documents are often expected to be presented:
- The last income tax return and income notices for a few years.
- Annual accounts or income surplus bills also a few years.
- Business evaluations (BWA).
- Business plan.
Many credit institutions only grant loans after a few years of successful self-employment. Some banks last two years, other banks only grant loans after five years or after seven years of self-employment.