Can I Get a Business Loan as a Sole Trader?
Yes, you can get a business loan as a sole trader. It can sometimes be more difficult to find a lender willing to offer a loan to a sole trader than it would be for a limited company, this is due to lenders viewing a sole trading business as more high risk than a limited company business.
Our experts at Clifton Private Finance can help you find the best loans available for sole traders and will make sure to get you the best deal for your personal situation, contact us to find out more information and to get started in finding your business loan.
What Is a Sole Trader Business Loan?
As a sole trader you may find it more difficult to acquire funding through the traditional routes, it is usually much easier for limited companies to acquire said funding as they are registered with the Companies House, but as a sole trader you may not be registered.
You can still get a business loan as a sole trader, and you will usually get the best terms on your loan if you are able to offer some form of valuable asset as security for your loan, such as a property or other valuable items, either personal assets or business assets.
You could still qualify for an unsecured business loan as a sole trader, which means you do not need to provide any assets as security for your loan, but you will usually not get the most desirable terms without any security.
Are There Advantages to Getting a Sole Trader Business Loan?
- If you are applying for an unsecured sole trader loan, you can keep your assets safe and you won’t be risking your business assets.
- Unsecured sole trader loans also mean you can access your funds quite quickly.
- Secured sole trader loans may have a longer process, but you can get more favourable terms with a secured loan.
- Sole trader loans are specifically targeted at the needs of sole traders, unlike other traditional methods of acquiring funding.
- The cash flow injection from a sole trader loan can help you get your business back on track, or expand your business in new ways.
- There are a variety of loans available, including the option to use either a secured or unsecured loan.
What Are The Disadvantages of Sole Trader Business Loans?
- As a sole trader, lenders will often see investing in your business as a higher risk than a limited company. This means you may not be offered the most favourable terms.
- You will often be asked to secure your loan through a personal guarantee or secure the loan against business or personal assets, this means if you miss your repayment you could be risking your assets.
- The amount you are able to borrow will be limited as a sole trader. This is also due to sole trader businesses being viewed as higher risk than a limited company, so you may not be able to get all of the funding you need.
What Are The Types of Small Business and Sole Trader Loans?
There are a few different types of loans you may be looking at when searching for a small business loan as a sole trader.
These types of loans include:
- Secured loans. Using your personal or business assets to provide a guarantee for your loan repayment.
- Unsecured loans. No requirement of securing your loan against assets, but you may not be able to borrow as much or get as desirable terms as you would with a secured loan.
- Retained profits. If you are a sole trader with a positive net income, you can reinvest your profits back into your business.
- Hire purchase. If you are a sole trader looking to acquire equipment or assets for your business, you can use hire purchase to pay a percentage of the assets value then pay a rental fee until you have paid the full amount for ownership of the asset or equipment.
- Crowdfunding. Depending on the type of business you have, you may be able to use crowdfunding as a source of income for further investment or expansion.
Am I Eligible for a Sole Trader Loan If I Have Bad Credit?
Although you may not get the best terms offered, you could still qualify for a sole trader loan if you have bad credit. Fewer lenders will be willing to offer you a loan but there will still be some options available, you may need to provide a personal guarantee or use a guarantor for your loan depending on how bad your credit is.
We highly recommend taking steps to improve your credit before applying for a loan whenever possible. If you’d like to get more advice on improving your credit and you want to learn more about your loan options as a sole trader, get in touch with our specialists at Clifton Private Finance for all the help and information you need
Why Choose Us?
Our business loan service provides:
- Market leading rates
- Fast service - finance within 5 to 7 days
- Access to specialist lenders
- Expert advice - professional service
Types of Business Loan We Can Source
Business loans for:
- Commercial mortgages
- Bridging loans
- Development finance
- Refurbishment finance
- Asset finance
- Buy to let property
- Invoice finance
Next Steps
As a specialist property finance broker, Clifton Private Finance can provide a clear picture of the options available to you. We will assess your specific set of circumstances and arrange a finance solution tailored to your needs.
A business loan may be used for the purchase of a property you intend to rent out, light refurbishment; renovation of an unmortgageable property, building an extension and converting a property.
Traditional Lenders
There have been recent changes, implemented by the Prudential Regulation Authority, that have greatly affected how lenders process applications for business loans for rental property, especially the buy to let market.
To secure a business loan from a traditional lender for a buy to let rental property you will need to provide evidence of your business, show that you can afford mortgage repayments in the event that the interest rate increases to 5.5%; have a rental coverage ratio of up to 145% for standard by to lets and up to 170% for houses in multiple occupation and ensure all your rental properties are profitable.
Traditional lenders’ criteria have become stricter and as a result applications generally take longer than before, it is not uncommon for applications to take up to several months.
The increased difficulty of securing a business loan for a rental property and the lengthy application process may make applying to a traditional lender an unattractive prospect.
Private Lenders
Applying to a private lender for a business loan could be a good alternative for your rental property. Typically, private lenders are more flexible and they often do not take as long as traditional lenders to process an application.
Private lenders’ business loan deals are usually not available on the high street, and the majority of them are not featured on comparison websites. Therefore, it is advisable to contact a specialist broker to access a loan from a private lender.
As a specialist broker, we can identify the loans available to you and identify the financial solution that is best suited to your set of circumstances.
