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Loan for self-employed

Reliable documents for the credit check

In contrast to employees, who only have to submit copies of their salary slips and a list of all liabilities for the credit check, the self-employed have to provide significantly more extensive documents. You must be able to clearly demonstrate how the business figures have turned out in recent years, which development you forecast for the future and what the loan amount requested is needed for.

As a rule, these documents are created with the tax advisor to clarify the sustainability. If you can use business evaluations for the past period, you should prepare the forecasts in detail: The better the bank employee can understand your plans, your chances of success and the planned profits, the greater your chance of a loan.

Business idea and earnings forecast

Business idea and earnings forecast

So describe your business idea in detail, describe the potential for an order and best prove this with preliminary contracts or declarations of intent. Based on your calculation and the planned sales volume, you can draw up a professional profit and loss account for the next three years, from which the bank can see the possibility of repaying the credit installments.

Even if they are only theoretical calculations, you should meticulously approach the creation of a business plan with all components. The associated liquidity and investment planning show that you have dealt intensively with all cost items.

Use of credit – check funding

Use of credit - check funding

Depending on the use of the loan amount, various grants can be considered for your financing project. If you are planning to invest in fixed assets, for example, there are cheap credit lines from KfW Bank to choose from, and lost grants can also be used. Intensive research in advance can give you information.

However, the KfW credit lines are not yet a guarantee that you, as a self-employed person, will actually get the loan, on the contrary. Very few house banks are interested in applying for and transferring these funds, as practice has repeatedly shown. On the other hand, you can apply for the funding directly, and your house bank will also be at your side – after all, this effectively reduces the financing risk.

Which documents should be compiled for the loan application?

Which documents should be compiled for the loan application?

  • Business plan with all components
  • Description of the intended use
  • Financial and investment planning
  • business evaluations of the past three years
  • Consent to the Credit Bureau query
  • curriculum vitae
  • self-Assessment
  • Foundation or company documents

Investments in real assets – collateral

Investments in real assets - collateral

In principle, you can assume that loans for investments are approved more easily than if you want to compensate for liquidity shortages – unless you can deposit a binding order as security. It is therefore always a question of usable collateral if the bank is to grant a loan to a self-employed person.

For this purpose, the bank works with the retention of title, a transfer by way of security or the assignment of claims, which enable the outstanding loan amount to be repaid in the event of a loan default. The situation is more difficult if the amount spent cannot be secured by the material value to be financed.

Liquidity and additional collateral

Liquidity and additional collateral

In these cases, the bank primarily checks the available liquidity, which must result in a reliable repayment of the financing. If there is already a long-term business relationship with your house bank, you can hope for significantly more understanding of difficult situations, since the development of your business can be viewed over a longer period of time.

If the potential of your company is not sufficient from the bank’s perspective, you can possibly make a positive decision with additional collateral. For example, a mortgage on a property, the transfer of real assets or an additional guarantee allows funding to be granted if the other framework is correct. However, you should not ignore the risks of recovery.

Credit Bureau – tip the scales

Credit Bureau - tip the scales

However, if there are already negative entries in Credit Bureau or a similar credit agency, no German bank will be able to grant a loan to a self-employed person. Then there are existential questions: Are you even able to sustainably put your business back on the road to success?

Of course, Credit Bureau entries can be made without the direct fault of a self-employed person. The payment defaults for orders that have already been completed usually trigger a fatal chain reaction that often ends with small companies. It is then important to carefully consider whether taking on new debt is the viable solution.

Claims management and contact with creditors

Claims management and contact with creditors

For the self-employed, a struggle for their own economic existence begins here. Only strict receivables management and a constructive dialogue with creditors can help out of such a situation. Approach the payee and describe the situation. Agree on installment payments or a deferral of payments to avoid further inconvenience.

On the other hand, you make payment agreements that offer you the greatest possible security. There are a number of ways to obtain credit information on the clients yourself in order to limit problems from the outset. In addition, an at least temporary optimization of the cost side is a tried and tested means of defusing crisis situations.

Factoring and other options

The factoring of invoices has proven its worth, especially in the trades, even if it reduces your bottom line: You sell the justified invoice and receive the money in return. However, you should be careful with these instruments, since of course there is also an external signal effect. But you have the opportunity to free yourself from a crisis situation on your own.

Alternatively, there are of course ways to get loans without Credit Bureau queries. On the one hand, there are platforms in Germany on which private financing can be obtained. On the other hand, there are always offers from abroad, since the query at a credit agency is not intended in most countries.

Honest risk analysis as a basis for decision-making

Apart from the fact that such financing must be critically examined, an honest analysis of your own situation should precede a decision:

  • Are you able to take a decisive turn in business development with the money raised?

If the loan is only to be taken out to service other liabilities, you are already in a dramatic spiral of debt: the costs of servicing current liabilities will continue to increase. An honest and painful cut is advisable at this point.

Get professional advice

Get professional advice

An open discussion with the tax advisor or a professional debt counseling service will help you to answer important questions yourself:

  • Is there a realistic chance of mastering the present crisis?
  • Can a solution be reached with bridging finance or is the current situation only mitigated?

If there is an opportunity to find viable ways with creditors to deal with a temporary crisis when the order book is stable, then do it. Then an alternative loan without Credit Bureau information can be a way to support you in this way.

Build effectively in good times

Build effectively in good times

In principle, the self-employed should seek dialogue with their bank in economically successful times:

  • Expand your current account.
  • Discuss your business development in detail.
  • Get credit cards.

Even if you do not need these options at all, you can always face difficult phases. However, the more impressive you have already presented yourself to your bank, the more generously it will deal with you in the event of problems.

If you then fight your way out of a crisis, also discuss any progress with your bank employee. The latter will appreciate the dialogue, as he sees his decision confirmed. The self-employed have to work significantly more with their bank in order to have a reliable partner even in times of crisis.

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