Self employment means that you are paying yourself a fixed amount of pay from the earning of your small business enterprise. It can also be termed as a plan to set up a small business for yourself and earn a living as a self employed individual. In both the cases the businessman may plan to go for a small business loan to either set up a new enterprise or boost up an existing one.
It is encouraging to know that to obtain Business loan by a self employed individual is not challenging job, especially when collateral is available to mortgage for the loan. The borrower has to put up a proof that the loan is either secured by collateral or can be repaid by a fixed monthly income. The process involves detailed and in depth documentations as a solid proof of the income to pay back the loan.
The Borrower has the choice to opt for any of the two types of loans available, the Secured Loan and the Unsecured Loans. The Secured loan is based on the assets of the individual or the company which can be mortgaged as a guarantee to lender to obtain the loan. Secured Loan is normally of a heavy amount and interest rates are on the comparatively lower sides reciprocating the value of the assets.
Unsecured business loan for the self employed do not require any sort of collateral. It normally for your day to day needs, they are also called Cash Advance Loan, the process does not involve any difficult paper work. The amount of is of lesser amounts; however the interest rates in this case are of higher rates. These loans are in most cases utilized or obtained for the following needs:-
- Setting up a new venture
- Up gradation / modernization of the enterprise from time to time.
- Purchase of Raw materials, inventories and supplies.
- Purchase of new equipments/ gadgets/ appliances.
- Purchase of extra or a new space for extension plan/ Renovation of existing place.
- Hiring of additional manpower.
Eligibility – To be eligible for these Business loans the individual must fulfill the following terms and conditions:-
- Must be more than 18 years old.
- A legal citizen of the country.
- Business history of at least a year.
- Good monthly profit record.
- Bank statement is not mandatory for cash advance.
- For enterprise loan 2 to 3 years of bank statement is necessary.
There are micro loans or as they are called the little organization loans. They are available for less than 3500 UK pounds, depending upon the earnings, net annual profits and turnover etc. In order to get the micro loan approved you have to conceive a workable business plan which highlights a high rate of successful probability of the business, thus ensuring a solid ground for the pay back of the loan.