If you are self-employed and have a sole proprietorship, you realize that you may need a loan to maintain liquidity to get your business through the process of gaining important clients or through important milestones, such as hiring key employees or coming up with the lease for your office space.
Why Work With a Lender Other Than a Bank?
According to Forbes, during the Great Recession, small business loans for sole proprietors all but dried up, especially during the years of 2007 through 2011. The big banks only were approving around 10 percent of small business loan applications. Even the small banks were only approving 42 percent of small business loan requests.
According to The Balance Small Business, during the Great Recession, small firms began to have trouble in the shrinking economy and had to cut back on expenses and lay off employees. Many small businesses shuttered. Others were left with poor credit scores.
In the wake of this lending emergency for small business owners, the backbone of employment in the country came the rise of alternative lending sources, including those that are online. Chosen carefully, these alternative sources are a vital piece of the puzzle for small business owners looking for quick loans to bridge liquidity issues.
Also, these loan sources tend to lend at rates that are far better than the alternative that most small business owners had to resort to for a time during the Great Recession, business credit cards. The average interest rate on small business credit cards is a whopping 15 percent. At that double-digit rate, it is hard for small business owners to pay off the debt. Servicing such high-interest rates also harms liquidity.
Now, in 2019, a decade after the last recession, U.S.A. Today warns small business owners that trade wars and an inverted Treasury market yield curve, as well as weaknesses in consumer financial health, could spell another recession is on the way. They suggest that small business owners secure lines of credit now, in advance of the recession.
Online lenders streamline the process for sole proprietors to get self-employed loans at a lower interest rate than a business credit card.
The Loan Process
Provide Financial Information
At a regular bank, they will likely require many different types of information, such as bank statements and pay stub or other income verification. The online lender will look at your credit history and your tax returns. They will not look at your banking activity. This provides you more privacy.
Also, online small business lenders only look for income verification if your credit history is poor. In that case, we will look at pay stubs or other income verification in order to see a pattern of liquidity.
The Contract
Then, the online lender will provide you a contract that will spell out terms such as the loan amount, the interest rate, the allowable use of the proceeds, the dates payments are expected and where to remit the payments.
Review With Your Lawyer
For your peace of mind, any contract that you sign on behalf of your business would best be reviewed with your lawyer.
Notarize Your Signature
You will need to take the document to your nearest notary public and have them witness and notarize your signature on the form.
The Lender Cuts the Check
As soon as the online lender has received your notarized and signed contract, they will cut you the check. It is as simple as that. This allows small companies to move quickly in order to get needed funds to expand their businesses.
Small businesses can be more nimble with self-employed loans
