Being self-employed is quite a challenging venture to undertake. Not many individuals choose this path in life, mainly due to perceived difficulties involved. A common hurdle faced by many people who are self-employed is that of finance.
Individuals who are self-employed are usually considered to pose a higher risk to traditional banking institutions, so they are scrutinised more than individuals who are employed by companies.
The good news is that in South Africa, self-employed individuals can qualify for up to R100 000 in finance at affordable interest rates. While many banks are reluctant to provide finance for these individuals, many micro lending institutions are often willing to assist.
The process isn’t easy though and self-employed individuals need to fulfil certain criteria before qualifying.
The strength of the business is usually assessed to ensure that a business owner will be able to secure the loan. Self-employed individuals need to prove that they will be able to service the loan in the high and low months.
Documents required for self employed
- Latest 3 months’ bank statements
- Valid South African ID
- No employment confirmation needed
How can you improve your chances of being approved for a loan?
Have a transactional account reflecting your income and expenses as well as your supporting information.
Have a good credit history and keep up to date with payments. Open a retail account or two and make sure that you make payments on time to maintain a good credit record.
Provide a cash flow forecast for the ensuing 12 months. This will show the lender that you will be able to afford to make repayments of the loan comfortably.
Ensure that you provide sufficient documentation to facilitate a faster loan payment. Provide the necessary business documentation to show that you have a stable and fairly consistent cash inflow.
Even though it may be more challenging than obtaining conventional loans, loans for self-employed individuals can be obtained with the right amount of effort.