Sole proprietor loans can help you get your company off the ground or finance essential investments that can ensure your success.
While these businesses don’t have it easy when it comes to financing, they can still access several financing options.
Here, we’ll break down some of the basic details so you can access the capital you need to grow your small business.
|Table of contents|
|1. What are sole proprietorships?|
|2. How to get a sole prop loan|
|3. Top 9 sole proprietorship loans|
|4. Get the capital you need for your sole prop|
|5. Frequently asked questions|
What Are Sole Proprietorships?
A sole proprietorship is a business structure that only has one owner. Most solopreneurs have sole proprietorships.
It’s the default structure of new businesses, where there’s no distinction between the business and the owner. In other words, all the business’s debts, losses, and liabilities are your own, too (but also the profits).
The IRS defines it as someone who owns a small unincorporated business by themself. This structure doesn’t have to register with the state to operate.
Sole proprietors are sometimes also called sole traders.
Pros And Cons Of A Sole Proprietorship
Some of the advantages of a sole proprietorship are:
- There are no corporate business taxes, no annual filings, or reports.
- It’s easy to set up and keep records, with a low cost associated with doing so.
Some of the cons are:
- Some see it as an unprofessional structure, making it challenging to raise money at times.
- There’s also the issue of liability, which makes you personally responsible for everything. Again, this can put your personal assets at risk.
How To Get A Sole Proprietorship Loan
Getting sole proprietor loans is a straightforward process. Follow these steps:
- Search for a lender, make sure that you meet their minimum requirements.
- Apply for the loan. Many lenders offer online applications that you can complete anytime, anywhere.
- Upload any supporting documentation the lender might require. Some lenders use apps like Plaid to review your business’ cash flow.
- Wait for a decision. Many online lenders can let you know in a couple of hours.
- Accept the business loan terms, and provide a way to receive the funds.
Sole Proprietor Loans: The Best Alternatives
Here are some of the best sole proprietorship loans:
Online Business Loan For Sole Proprietor
These are term loans that you can use to finance all your business needs. Because they’re online, it’s easier to qualify for them, and the whole lending process can span a few days.
These small business loans provide cost certainty because they have a set:
- repayment period
- lending amount
- interest rate (in most cases)
All these reasons are why these are outstanding sole proprietor loans.
At Camino Financial, we have sole proprietorship loans. We offer an easy application and approval process and favorable repayment terms. Plus, our minimal requirements make them the best option for any business owner.
Some of our benefits are that we approve applicants with no credit history, accept ITIN, and don’t require collateral.
SBA Sole Proprietor Loans
The Small Business Administration offers loan programs that you can use as business credit for a sole proprietorship.
The most popular government business loan is the 7(a) loan. This program provides sole proprietors with low-interest rates. The problem with SBA loans is that they can be tough to qualify for.
Bank Loan For Sole Proprietorship
You can also get sole proprietor loans through traditional banks. However, bank business loans can also be tough to qualify for.
In addition, their stringent requirements might make it challenging for a sole prop to receive approval.
And if you do get the loan, you may even have to put down significant collateral.
Credit unions are a similar option that tends to have easier-to-meet requirements.
Sole Proprietor Business Credit Card
An alternative to a sole proprietor loan is to get a credit card and use it to fund your business.
It’s not a small business loan per se, but it can help you finance the business expenses that will help you grow.
The downsides are your credit limit may be low, and the interest rate could be pretty high.
Line Of Credit
When looking for how to get sole trader start-up loans, you might stumble on lines of credit.
These work like credit cards: you have a credit limit that you can use on whatever purchases you need.
However, the repayment terms are often much shorter than other sole proprietor loans. You may also be very limited on how much you can draw down at one time.
Merchant Cash Advance
With a merchant cash advance, the business owner gets a lump sum amount upfront. But it’s not a loan per se; the money is in exchange for a percentage of their future debit and credit card sales. So, of course, they’ll have to have a history of debit and credit card sales to show.
Many see MCAs as a viable option because they are easily approved. The problem is that they can be quite expensive.
You can use personal loans as sole proprietor loans.
They are a great option because they only rely on your personal finances and credit history.
You can also find many good online business lenders. For example, Camino Financial offers one of the best personal loans that you can use for business financing.
Many small businesses have turned to crowdfunding to raise money. You post your needs on a crowdfunding platform, and people contribute to your cause.
You’ll need to market your campaign really well, though. Plus, based on what you described, you could be very limited to how you use the funds.
This option doesn’t allow you the typical freedom of other sole proprietor loans.
Friends And Family
Another option is to borrow money from friends and family.
This is one of the primary sources of financing for many sole proprietorships. Why? Because they often don’t meet the minimum requirements for traditional lenders.
But this option could hurt your relationships if you can’t pay the money back.
Get Sole Proprietorship Loans For All Your Business Needs
Traditionally, these businesses don’t have the same revenue as other businesses. That’s why sole proprietor loans aren’t as abundant as other types of capital.
Still, many alternative lenders, such as Camino Financial, are willing to help you.
We work hard every day to live up to our motto of “No Business Left Behind.” As a result, our financial products have minimal requirements and friendly terms.
Apply for a business loan for sole proprietor today to start growing your business.
Can I get a loan as a sole proprietor?
Yes, you can get sole proprietor loans. However, you will have limited choices when compared to other types of businesses.
Can sole proprietors get an SBA loan?
They can. However, many SBA lenders may not cater to sole proprietors.
Can you get business loans for sole traders with bad credit?
Yes, you can. Some lenders will accept sole traders with bad credit or no credit at all. However, keep in mind that they might charge high-interest rates or require collateral.
Make sure to research several lenders the one that best suits your needs.
Can a sole proprietor build business credit?
Yes. If the loan is in the name of the sole proprietorship (and not the business owner), then repayments will go towards the business credit.
How to build business credit as a sole proprietorship?
Any time you make repayments on loans, it helps you build credit. If the loan is in the business’s name, timely repayments will build a good credit score.
How much does it cost to start a sole proprietorship?
Many sole proprietorships can cost as little as $1,000 to start. While that’s cheap compared to other business structures, that doesn’t include any costs for technology, equipment, or products. That’s why getting sole trader start-up loans is a good idea.