Independent Contractor Loans: Different Types and How To Get One

Camino Financial17 Nov 2023
Independent Contractor Loans: Different Types and How To Get One
While many independent contractor loans are available, knowing which you qualify for and which best suits your needs is difficult. You must understand that as an independent or 1099 worker, you still fit the box of a small business owner, and yet, sometimes, accessing a loan is even more challenging. This article will explore the different types of loans for independent contractors available for your business and discuss how to get a loan as a 1099 worker.
Table of Contents
1. Who is an independent contractor?
2. Independent contractors vs. Self-employed workers
3. Financial issues that independent contractors might face
4. Types of loans independent contractors can access
5. How to get a loan as an independent contractor
6. How self-employed individuals use loans
7. Who helped independent contractors during COVID-19 times?
8. FAQs

Who Is an Independent Contractor?

An independent contractor works for a company on a contract basis. They are not employed full-time by the company they work for. They are often called 1099 workers, as this is the IRS form used to report income for contractors.

Independent Contractors vs. Self-Employed Workers

Independent contractors are self-employed, but there are nuances and technicalities involved. Businesses hire these contractors to complete specific tasks or projects through a contract. These people are not considered company employees. They are therefore not entitled to employee benefits such as health insurance or paid time off. Self-employed workers are their own bosses. They work for themselves and are not hired by another company to do specific tasks or projects. They are responsible for filing their own taxes and Social Security.

What Type of Worker Am I?


The IRS says you are self-employed if you are "in business for yourself." This includes people who are:
  • Operate a sole proprietorship, with or without employees
  • A member of a partnership that conducts business
  • In business as an independent contractor, freelancer, or consultant
  • In business for yourself as a real estate agent, broker, appraiser, etc.?
  • Share in the profits and losses of a business through a:
    • Corporation
    • S Corporation
    • Limited Liability Company (LLC)
    • Limited Liability Partnership (LLP)


You are a contractor if you are:
  • An independent contractor
  • A freelancer
  • A consultant
  • A self-employed individual
If you are unsure whether you are an employee or a contract worker, you can contact the IRS for help.

How to Prove Income as a Contractor/ Self-Employed Worker?

The main ways to prove your income as a contractor or self-employed worker are through invoices, tax returns, bank statements, and financial records.


As a contractor or self-employed worker, you should always issue an invoice for any work you do. The invoice should include your name and contact information, the name and contact information of the client, a description of the work performed, the date you worked on it, the amount charged, and the payment terms. You should keep a record of all cash payments if your clients pay you in cash. This can be in the form of a receipt book or ledger.

Tax Returns

If you are registered for GST (Goods and Services Tax), you must file a tax return every 3 months. Your tax return will show your total income and expenses for the period and any GST collected and paid. This is a good way to prove your income, showing how much money you have made from your contracting or self-employment activity.

Bank Statements

Your bank statements will show all the deposits made into your account and any withdrawals or transfers. This can be a good way to track your income and expenses and see if there are any patterns in your spending.

Financial Records

It is a good idea to track your monthly income and expenses. You can do it using a simple spreadsheet or accounting software. This will help you to see how much money you are making and where your money is going. It'll be useful for tax purposes.

Is It Possible to Get a Loan as an Independent Contractor?

Yes. An independent contractor loan is for 1099 contractors and other self-employed individuals. These loans are for various purposes, including starting a business, expanding a business, or covering personal expenses. Independent contractor loans have higher interest rates than traditional small business loans. They are a good option for those who don't qualify for a traditional loan.

Apply for a business loan today

How Do 1099 Employees Get Personal Loans?

1099 employees can get personal loans, but it can be difficult. Lenders will want to see evidence of a stable income, and because 1099 employees are not considered full-time employees, it can be more difficult for them to prove their income. Many lenders offer a small business loan for independent contractors that you can use for personal expenses. These loans are usually based on the business's credit score and annual revenue rather than the credit score and income of the owner. The best way to improve one's chance of a lender approving you for a business loan is to have a good credit score and high annual revenue.

Financial Issues That Independent Contractors Might Face

One financial issue that might face an independent contractor is getting paid on time. Many businesses struggle to pay their bills on time, so contractors may have to wait longer for payments. This is a problem if the contractor relies on a steady income to pay their own bills. Another financial issue they might face is getting paid the full amount owed. Businesses may try to lowball contractors by offering them a lower price than they agreed to. Independent contractors should also be aware of the risks involved in new projects. Some projects are not as profitable as others, so contractors should only take on projects they are confident they can complete. Otherwise, they may end up losing money on the project. These issues help independent contractors grow as entrepreneurs as they show that you know the financial challenges you may face and have experience navigating them. If you can navigate these challenges and stay afloat, then you will be in a good position to grow your business.

Types of Loans Independent Contractors Can Access

A few different types of loans are available to independent contractors. The most common type of loan is an SBA loan. These loans have the backing of the Small Business Administration and have low-interest rates. Here's a look at these types of loans in detail.

SBA Loans

The Small Business Administration (SBA) offers a variety of loan programs to small businesses and self-employed workers. The maximum loan amount is $5 million. Loan terms vary depending on the purpose of the loan, but most SBA loans have a repayment period of 10 years or less. SBA loan fees vary depending on the type of loan, but they can range from 2% to 4% of the loan amount. For an SBA loan, you must:
  • Be in business for at least 2 years
  • Have a credit score of 620 or higher
  • Have a strong business plan
  • Use the loan for a specific purpose, such as starting or expanding a business, purchasing inventory, or buying real estate

PPP Loans

The Paycheck Protection Program (PPP) was a government loan program that provided loans to small businesses to help them cover the cost of payroll and other expenses. Independent contractors were eligible for PPP loans as long as they met the program's eligibility requirements:
  • Have 500 or fewer employees to be eligible for the PPP.
  • Be able to show that you can repay the loan.
Business owners applied for a PPP loan as independent contractors by completing an online application on the SBA website.


There are also many grant programs available to small businesses and independent contractors. These programs provide funding for various purposes, such as starting a business, expanding a business, or covering the cost of disaster relief. There are no fees associated with grants, as the funding comes from government agencies or nonprofit organizations. You must meet the program's eligibility requirements to be eligible for a grant. This varies depending on the grant program. Some programs require a certain amount of revenue, while others restrict the type of business you can operate. The application process for grants also varies depending on the program. Some require you to submit an online application; others require a paper application. You can find more information on applying for grants on the federal government's Small Business Administration website.

Personal Loans

Another type of loan that is available to them is a personal loan. These loans can serve various purposes, including starting a business, expanding, or covering personal expenses. Personal loans have higher interest rates than traditional small business loans. They are a good option for those who don't qualify for a traditional loan. You may have difficulty qualifying for a traditional personal loan as a self-employed. However, plenty of options are available to help you cover your business expenses. You can get a business credit card, which can offer you flexible spending power and valuable rewards. You could also consider a business line of credit, which can give you access to funds as you need them. Or, if you have strong personal credit, you might be able to qualify for a personal loan with more favorable terms by applying through a peer-to-peer lending platform.
#DidYouKnow Can You Refinance a Personal Loan? How to Do It

Merchant Cash Advances

Merchant cash advances are best for those who process credit card sales and can use them to fund short-term needs like inventory or marketing initiatives.

Lines of Credit

A line of credit is a type of loan that allows you to borrow money up to a certain limit. You can then use the money as you need it and repay it over time. Lines of credit are a good option for those who need flexibility in using loan funds. Eligibility for a business line of credit asks good credit history and a steady income. You can apply for a line of credit by completing an online application on the lender's website.

Payday Loans

Payday loans are a type of loan that is typically used to cover unexpected expenses or to tide you over until your next paycheck. They are short-term loans with high-interest rates. Payday loans are illegal in some states, so be sure to check the laws in your state before you apply. To be eligible for a payday loan, you must have a steady source of income and an active checking account. You can apply for a payday loan by completing an online application on the lender's website.

Auto Loans

If you're looking for a loan to purchase a vehicle, you may be able to get an auto loan from a bank or credit union. Many online lenders offer loans for independent contractors. To apply for an auto loan, you must be able to repay, such as showing a steady income.

Unsecured Business Loans

An unsecured business loan doesn't require collateral. This makes it easier to qualify for a loan, but it also comes with a higher interest rate. Make sure you understand the terms and conditions of an unsecured loan before you sign anything. An unsecured business loan requires high credit scores and a steady income. Apply for a business loan today

How to Get a Loan as an Independent Contractor

There are a few different ways to get a business loan for self-employed individuals.
  1. The most common way is through a bank, a small business association, or a credit union. Many online lenders offer loans to independent contractors.
  2. When applying for a loan, have all your financial documentation in order. This includes your tax returns, bank statements, and any other financial statements.
  3. It's also a good idea to have a business plan ready. This will give the lender a better understanding of your business and how you plan on using the loan.
  4. You'll need to fill out an application and provide documentation of your income and expenses. The lender will then review your application and decide whether to approve you for a loan.
  5. You'll need to sign a loan agreement and agree to repay the loan plus interest and fees over a set period if approved. Make sure you understand the loan terms before you sign anything.
  6. Once you've signed the agreement, the lender will disburse the loan funds to you. You can then use the money for any purpose you need.
Getting an independent contractor loan is the same as a traditional small business loan.

How Self-Employed Individuals Use Loans

There are many different ways you can use an independent contractor loan. Some common uses include:
  • Covering the cost of startup expenses
  • Financing the expansion of your company
  • Purchasing equipment
  • Paying for the cost of disaster relief if your business takes a hit thanks to a natural catastrophe
  • Getting help with making payroll

Who Helped Independent Contractors During COVID-19 Times?

The PPP's purpose was to help small businesses keep their workers employed during the coronavirus pandemic.
  • The program, which is no longer available, provided loans of up to $10 million to small businesses. The loans were available for payroll and expenses such as rent and utilities.
  • The Economic Injury Disaster Loan (EIDL) program was available to small businesses and independent contractors affected by the coronavirus pandemic.
  • The SBA Express Bridge Loan program was available to small businesses with an existing relationship with an SBA Express Lender.
  • The Coronavirus Aid, Relief, and Economic Security (CARES) Act was a $2.2 trillion stimulus package passed by Congress in March 2020 in response to the coronavirus pandemic.

Loans for Independent Contractors in 2022

If you're an independent contractor, don't worry - there are plenty of loan options out there for you. The government has a few programs for independent contractors and small business owners. Private lenders also offer loans tailored to the needs of small businesses. To help you navigate the process and land the right funding, Camino Financial can help. Our business, micro, and startup loans have the best rates and terms for your business, with minimum requirements. Sign up today to get your first quote. Apply for a business loan today


Is it hard to get a loan as an independent contractor?

As long you prepare your business documents, getting a loan as an independent contractor is not hard. As an independent contractor, you will likely have more business expenses than someone employed by a company. This means you will need to provide documentation of your expenses to prove that you are a credible borrower. Be sure to keep good records of your expenses, and be ready to show proof of your income and debt-to-income ratio.

What is a 1099 contract?

A 1099 contract is a contract between a business and an individual or another business under which the individual or business agrees to provide services to the company. The company agrees to pay the individual or business for those services, and the individual or business agrees to reimburse the company for any allowable expenses incurred in providing those services.

Is an independent contractor self-employed?

Yes, an independent contractor is self-employed. This means that they are responsible for their own taxes and business expenses.

Are independent contractors eligible for PPP?

According to the SBA, independent contractors and self-employed individuals negatively impacted by the global crisis of COVID-19 were eligible for PPP and other government loans for self-employed, which helped them get back up again!

What are the best loans for self-employed individuals?

You can use a business line of credit for working capital or short-term expenses. Another option is an SBA loan specifically designed for small businesses, and you can apply if you are a sole proprietor There are also merchant cash advances, which are quick and easy to qualify for and don't require a traditional credit check.

How can I apply for loans for 1099 independent contractors?

Finding funding for independent contractors might be difficult because you don't have the steady income that full-time employees do. However, you can apply for a loan through an online lender specializing in small business loans for the self-employed. These lenders are often more willing to lend money to contractors, and they may be able to offer lower interest rates and longer repayment terms than traditional banks.

What are some examples of independent contractors/self-employed jobs?

Examples of independent contractor/self-employed jobs include:
  • Photographer
  • Website designer
  • Virtual Assistant
  • Bookkeeper
  • Online writer
  • Research study assistant
  • Graphic designer
  • Social media marketer

What kind of loan can I get as an independent contractor?

Independent contractors (ICs) can qualify for several types of loans, including business loans, lines of credit, and merchant cash advances.

Prequalify in
5 minutes

Select your desired loan type.

Latest Articles

Prequalify in 5 minutes

  • Stay connected

    Join a community of over 40,000 micro-entrepreneurs for access to informative resources, helpful tips, and best practices on growing your business

  • Mission-driven company

    Camino Financial is a nationally certified Community Development Financial Institution (CDFI) with oversight by the U.S. Department of Treasury. By partnering with other mission-aligned organizations, Camino Financial is able to pool and distribute low-cost funding and educational resources to underbanked minority-owned businesses. Camino Financial is headquartered in Los Angeles, California with supporting offices in Mexico City, Mexico.

© 2024 by Camino Financial, Inc. All Rights Reserved. Camino Financial is a Licensed Finance Lender & Broker in California under its subsidiary Salas & Company LLC.
Camino Financial Better Business Bureau A+ accredited businessCloudflare

11501 Sunset Hills Rd, Reston, VA 20190 || Tel (800) 852-0655

NMLS License: Salas & Company LLC #2186459 | CFL License: Salas & Company LLC (DBA Camino Financial) #60DBO-43053

CDFI Certification Number: 181CE054231