As a self-employed professional, getting a personal loan depends on a variety of factors. These include a good credit history, a strong income to debt ratio and a clear business plan, among others.
The freelance or gig economy has witnessed double digit growth in the last decade alone. Professionals who value an independent lifestyle in terms of work hours and projects have challenged convention to carve out a niche for themselves in an increasingly competitive marketplace.
From tutors to software coders, fitness trainers to dieticians and virtual assistants to personal shoppers- self-employed professionals constitute up to 51% of India’s total workforce.
These self-employed professionals are a silver lining for the economy, which is currently witnessing the worst unemployment rates in recent memory. The government is now offering various loans and financial incentives for the self-employed, e.g. personal loan Bajaj which do not require collateral.
If you’re looking for a personal loan for self-employed professionals, here are a few ways to position yourself to get it on the best possible terms. This is because business loans are by definition different than those meant for personal use and require a different approach.
Maintain a financial record:
Keeping a record of business expenses and earnings provides you a 360-degree view of the financial state of your business. A consistent, clear and concise financial report helps lenders to assess your creditworthiness and offer loans tailored to your needs.
Income tax returns, profit and loss statements, balance sheets, bank statements etc. are some significant financial documents that need to be recorded accurately.
Keep your debts clear:
It is advisable to be disciplined in terms of debt, as banks will lend you more money only if you have a clear ability to repay. A bad credit history can impact your long term ability to obtain finance. It might create cash flow problems for you and affect your delivery timelines.
Build an accurate credit report:
If you use business credit cards, a good credit score increases your chances of being given higher credit limit and short term loans. Credit agencies such as CIBIL determine your ability to repay based on markers like settled and defaulted payments, credit utilization ratio, etc. Hence, a consistent and clear credit report improves your prospects for getting cheap loans.
Create a balanced business plan:
A systematic and strategic plan for your business helps your identify uncertainties, analyse market risks, and set priorities. It is essential to have a well-defined plan for your business to win the trust of not just banks and financial institutions but also investors, prospective customers and regulatory agencies.
Always seek an expert’s advice:
To audit your books of accounts and comply with regulations, it is a good practice to only rely on professional accountants. An audit report from a Chartered Accountant will prove your creditworthiness in the financial institutions when you apply for an unsecured personal loan or loan without collateral. The CA can also help you reduce your tax obligations and save money.
Opt for a suitable financial institution:
Not all financial institutions offer personal or business loans without collateral to self employed professionals. Research your options before you approach a bank with your application knowing what are required business loan documents and their eligibility criteria.
For example, Bajaj Finserv Business Loans offer a number of loan options for the self-employed. The business loan facilitates you with up to 30 Lakhs of loan amount which can help you invest in your business. This could help you market your business better and increase your revenues.
With its Flexi Loan option, you pay interest only on the part of the available credit that has already been utilized. You can save a substantial amount in terms of interest and reduce the overall cost of borrowing.