How to Get a Personal Loan as an Independent Contractor in 6 Steps

As an independent contractor or 1099 worker, you’re essentially a business owner. You’re responsible for managing your day-to-day responsibilities and setting your own hours.

You may enjoy increased earning potential and have greater autonomy over your work. However, you’re not immune to the daily challenges that come with being self-employed.

For starters, you’re not eligible to receive employee benefits. Your monthly income also isn’t guaranteed. Some months, you may earn more, while other times, you may earn less.

The good news is that independent contractors and 1099 workers have access to many of the same resources as other business owners.

You may be able to take out a loan to make managing your day-to-day finances easier and expand your operations. Here’s our guide on personal loans for independent contractors and 1099 workers.

What Is an Independent Contractor?

An independent contractor, or a 1099 contractor, is a self-employed person contracted to provide services for another company or business. Oftentimes, this work is performed independently or on a project-to-project basis.

Independent contractors don’t have a capped salary. Instead, they have flexible working hours and can choose the type of work projects they’d like to pursue.

However, they don’t receive employee benefits – which means they have to foot their own health insurance costs and retirement savings. They are also responsible for paying estimated taxes on a quarterly basis.

Related: Contractor Business Loan

What Are the Most Common Financial Issues Faced by Independent Contractors and 1099 Workers?

Working as an independent contractor has its benefits, such as:

• Flexibility – Greater control over your work schedule and your work location
• Independence – More autonomy in making decisions as opposed to regular employees
• Variety of clients – Allows you to work with multiple clients simultaneously
• Diversified income streams – This ability to work with multiple clients diversifies your income stream
• Business ownership – Being an independent contractor means that you are essentially running your own business
• Tax deductions – You can take advantage of tax deductions for business expenses
• Portfolio building – Allows you to build your work portfolio and attract more clients

Nonetheless, despite all of the benefits, there are several challenges that come with being self-employed – which can result in financial uncertainty and stress.

So, before we deep dive into personal loans for independent contractors, let’s take a look at some of the challenges:

– Income Not Guaranteed

One of the perks of being an independent contractor is enjoying uncapped income. You can set your own rates, and there are no limits on how much you can earn. However, the other side of this is that your income is constantly subject to change.

Regular employees with a set salary know how much they will bring in any given month. This isn’t the case with independent contractors, whose income is directly related to client needs and the number of projects you take on.

This can make budgeting difficult, and you may be prone to cash flow challenges – especially if you’re faced with an unanticipated expense. According to Statista, more than 55% of independent contractors earn less than $50k yearly.

– Paying For Business Expenses Yourself

As a business owner, you’re responsible for paying all the expenses associated with your work. This includes office space, technology, raw materials, and more.

You’ll be able to deduct expenses on your end-of-year tax returns, but in the meantime, you’ll have to manage them on your own.

It can be challenging to come up with large sums of money, especially if you have unexpected expenses or if clients are falling behind on invoices. Cash flow disruptions are, unfortunately, a common burden for many independent contractors.

– No Benefits Plan

Regular employees may receive health care plans, retirement plans, matching 401(k), paid vacations, or any number of benefits. As an independent contractor, you’re not entitled to these perks.

As a result, you’ll have to be very diligent about setting funds aside for healthcare expenses, retirement savings, and other types of costs.

– Job Security Is Not Guaranteed

It’s not uncommon for independent contractors to face employment uncertainty. Clients can change direction without notice, or projects may be put on hold.

Even if you have a contract readily in place, there’s always the risk the contract could be canceled. There’s also no government legislation protecting independent contractors from workplace discrimination or other unfair labor practices.

What Are Personal Loans for Independent Contractors?

Many self-employed workers and business owners will seek out personal loans for independent contractors to mitigate cash flow issues and make it easier to meet financial obligations.

Personal loans for independent contractors are unsecured loans that provide self-employed individuals with funds for personal or business use. They are flexible, credit-based loans with fixed or variable interest rates and are not tied to a specific project or expense, offering borrowers financial flexibility.

Borrowers must meet credit criteria and provide income verification during the application process.

These loans can be used for various purposes, from covering personal expenses to supporting business operations, making them a versatile option for self-employed individuals.

This type of loan can be especially helpful during slow seasons, if clients are behind payments, or if contracts end unexpectedly.

The best part about independent contractor loans is that they can be put to a number of different expenses, including:

• Covering health insurance costs
• Paying for raw materials
• Investing in marketing campaigns
• Expanding to new markets
• Purchasing equipment, tools, or software
• Renovating your workspace
• Consolidating debt
• Covering tax liabilities
• Investing in technology upgrades
• Traveling expenses
• Vehicle maintenance

With National Business Capital, getting an independent contractor loan is simple and straightforward. There are funding options available for all types of credit scores and revenue scenarios. You can even secure financing with your unpaid invoices.

What Are the Pros and Cons of Personal Loans for Independent Contractors?

Here are the pros and cons of personal loans for independent contractors and 1099 workers.

How to Qualify for Independent and 1099 Workers Loans

So, how can you qualify for personal loans for independent contractors and 1099 workers?

Qualifications will vary from lender to lender, but most institutions prioritize your income and credit score above all else. Still, there are a few documents you’ll need to provide.

• Personal information, like your social security number, if you aren’t using an EIN for your business
• Invoices
• Tax returns
• Bank statements
• Financial records

The latter four documents are used to prove your income, which is used to determine your eligibility, funding amounts, and more. Traditional businesses do this through the same documentation.

It’s important to research various lenders you could work with before applying. You’ll take note of their qualifications, funding times, reputation, and any other relevant factors to establish a list of top lenders, then apply with them.

Apply for a 1099 Loan in 3 Simple Steps

You can apply for an independent contract loan with National Business Capital in as little as 3 easy steps. Your application will be reviewed in hours, and you may be able to receive your funding amount shortly after. Follow these simple steps to get started.

1. Submit an Application

Head over to National Business Capital’s application page and fill out the online form. You’ll be asked to provide some basic information, but the overall process shouldn’t take more than a few minutes.

Once you have submitted your application, a Business Finance Advisor will reach out to learn more about your business and goals. They will offer you an update on your application, ask for more information, and consult you on the best financing option for your situation.

2. Review Your Offer

Once your documents have been received and verified, National Business Capital will provide you with a list of financing solutions you’ll be able to choose from. You can consult with your Business Finance Advisor about the different pros and cons of each alternative.

Once you’re ready to make a decision, you’ll receive a promissory note to sign. Once that is signed, the money will be transferred to your account in as little as 2 to 3 business days!

3. Receive Your Money

Once the money has been deposited into your account, you can begin using it any way you see fit! Make sure to stay on top of your required payments and stay connected with your lender in case you need additional capital during your repayment.

Whether you’ve chosen a small business loan or revolving line of credit, staying on top of your repayment is of the utmost importance. If you suspect that you’ll miss a payment, reach out to your lender ahead of time.

Related: Fast Business Loans

Getting a Personal Loan for Independent Contractors with National

National Business Capital is the leading Specialty Finance Group for small businesses – including independent contractors and 1099 workers. We’ve found that self-employed individuals can benefit from the flexibility of our products and our fast approval rates.

To learn more about what funding solutions you may qualify for, get in touch with a Business Finance Advisor here.