Self-Employed Loans

Lack of safety net

Many people who are self-employed are less ready for negative events that larger companies. For example while large companies factor in things like legal challenges, most small business owners don’t have anything to fall back on should they face being sued. Many small business owners also use savings for emergencies, rather than using this money for potential growth. A lot of self-employed people also don’t allow contributions to their superannuation. 

Self-taught financial management

When you are self-employed you often have to learn to manage your business finances. This is often where small business people trip. There is a very high percentage of small business owners who freely admit that their methods are less than stellar and could do with improvement.

We recommend the following for help improve your financial management:

• Review your financial situation on a regular basis
• Develop and stick to a budget. Check out our free budget planner here…
• Put away money for taxes
• Ensure you keep your high-interest debt to a minimum
• Give yourself a regular salary
• Get advice on your business structure so it is optimised for tax and growth
• Ensure you know what you can claim legitimately on tax and maximise this.

Banks are notorious for not lending to the self-employed. Most small business do not feel the banks are supportive or understanding of their needs.

Credit officers at banks look for collateral, regular income and employment, steady savings and other criteria that self-employed professionals don’t embody.

You can improve your chances loan approval with by applying with bank alternatives like Australian Lending Centre.

Do-it-yourself methods

A lot of self-employed professionals enter fields with little to no experience, educating themselves as the need arises.

Small businesses are amazing for their ability to perform all the same functions as large businesses with less staff. The problem is that self-employed people stretch themselves really thin and while they may get through, it often causes longer term problems with short cuts taken along the way and bandaid approaches. This can lead to inefficiencies and puts the small business at a disadvantage.

Specific knowledge on key topics is vital when running your own business. It’s a good idea to bring on a an expert adviser in a consultant capacity in areas that aren’t your core area of expertise, particularly when it comes to financial management.

Traditional lenders will generally consider any source of income that is stable, consistent, and ongoing.

Many businesses go through ups and downs. For instance, a property developer starting a new community may have a lot of expenses one year, buying property, applying for DAs and building. The business may show little income or even big losses for that year.

The following year, however, the properties sell and the income shows as very high. If you apply for a loan during the first year, you’ll have to prove to the lender that your business is healthy and that this is a regular pattern.