For a small business loan, a distinction should be made between two categories of credit. On the one hand, it can be a loan that is required for an investment in the company and, on the other hand, it is a loan that the small business owner would like to use for private purposes, for example the purchase of consumer goods.

If the loan is intended for private purposes, the situation is completely different from that of a company loan. With both variants, however, it is difficult to find a bank that takes the risk and lends to small business owners. Unfortunately, many banks never grant loans to self-employed and freelancers. Small business owners are one of them. This article explains the options for a loan approval.

Small Business Loan – Home Use

Small Business Loan - Home Use

Few banks offer self-employed loans for private use. In the case of a married self-employed person, the loan application should be made together with the partner. Ideally, the partner who has a fixed income is the first applicant. In this case, the bank processes the loan application as normal. If the partner’s income is sufficient, the loan application is usually also approved. A small business owner who makes the application on his own should be well prepared, as the bank will request a lot of documents that it needs to make a decision.

First of all, the bank would like to see corresponding figures on the company. Therefore, a current BWA should be submitted at the same time. In addition, the last income tax assessment is usually requested. From this, the income of the past becomes clear. The bank will also obtain information from the house bank and business information from a so-called credit agency. Accordingly, the processing of credit inquiries from commercial customers takes longer than with a conventional credit inquiry. The self-employed usually have to wait at least two weeks for a loan decision.

Small Business Loan – Commercial Purposes

Small Business Loan - Commercial Purposes

If the loan is to be for the company, it is not at all recommended that the spouse or other family members be included in the contract. The chances of getting a loan are not bad here. The prerequisite for this is that the company results are reasonable and there is equity capital. It is also advantageous if other collateral is available. This loan for small business owners should best be applied for at the house bank, since the applicant is known and can discuss details personally. However, the conditions can be worse than with a loan from a direct bank.

Personal loans

Personal loans

Anyone who is in a financial emergency and is excluded from a loan for small entrepreneurs at conventional banks can ask in the private sphere whether someone could lend the desired amount. In the ideal case, this happens within the family, who usually like to help out. The advantage is that in most cases the loan is granted without interest and the processing is unbureaucratic. However, anyone who takes this step should also record everything within the family in writing.

It is advisable to note the loan amount, the installment amount and, if available, the interest in a contract. This ensures both parties and disputes are avoided. If nobody can lend the money in a private environment, there is also the possibility of a private loan for small businesses on the Internet. Many private individuals now offer their money on numerous websites.

Provide a loan with a guarantor or with collateral

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If all attempts to get a loan have failed, it is possible to use a guarantor. This reduces the risk of a credit default for the bank. The guarantor undertakes to pay the installments in the event that the actual borrower has payment difficulties. In order for the guarantor to be accepted when applying for a loan, the prerequisites are a clean credit bureau file and an income that is above the garnishment limit. Another option for securing the loan is if the applicant has, for example, a property or life insurance policy for which the value corresponds to the loan amount.

Credit comparison on the Internet

Credit comparison on the Internet

When looking for a suitable loan, it is always very important to use the free and non-binding loan comparison on the Internet, because this can save costs. This allows consumers to compare and carefully review the terms of different loan offers. For this purpose, the desired loan amount and the term are entered in the comparison calculator. The interested party will receive a list of the offers within a few minutes.

In doing so, particular attention should be paid to the effective interest rate, since this already includes all costs and thus offers an objective overview. If an offer has been selected, the transfer to the best provider and the conclusion of the loan can be carried out on favorable terms immediately after the comparison. The application takes a few minutes and the payment is usually made after a few days.