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SBA Loans for Independent Contractors and the Self-Employed

SBA Loans for Independent Contractors and the Self Employed; If you're self-employed or an independent contractor, see what kind of SBA loans you may qualify for. Learn more from Lantern by SoFi.
Susan Guillory

Susan Guillory

Updated July 16, 2021
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There are small businesses, and then there are really small businesses. A small business might have 100 or more employees. Or it might have just one. If you’re a one-person show, otherwise known as self-employed or an independent contractor, you might feel like there aren’t business loans targeted toward you. And you may wonder what your options are.The good news is that you absolutely may qualify for an SBA loan for self-employed people or for one of several other types of small business loansLet’s look at what it means to be an independent contractor or self-employed worker and then explore your loan options. 

What is an Independent Contractor?

Companies can hire help in one of two basic ways. First, they can hire full- or part-time employees. That may require paying for employee benefits like health insurance. Companies provide a guaranteed salary for these roles.The other option is to hire what are called independent contractors. These people are not employees and may work on a project basis or for a fixed number of hours each month. They are not guaranteed a salary and may be paid by project or by the hour. They generally don’t receive benefits like health insurance.But another important factor that differentiates between the two kinds of work is the tax forms each receives and needs to submit to the IRS at tax time. Employees submit a W-2 form, which lists salary for the year and taxes taken out. Independent contractors submit their 1099s, which list payments received. No taxes are taken from the money paid to an independent contractor. (They're responsible for paying their own taxes.) Note: businesses only have to provide a 1099 if the contractor earns $600 or more in a year.If you’re looking for independent contractor loans and are concerned that you don’t qualify for small business loans because they seem to be aimed at bigger small businesses, keep reading. In the eyes of the SBA, an independent contractor can qualify as a small business and may be able to receive loan funds.

Are Independent Contractors and Self-Employed People the Same?

The answer to this question is that they can be, sometimes.An independent contractor provides services for someone. That might be a writer providing content for another company or a remodeling contractor working for someone who wants a bathroom upgrade. The common denominator is that an independent contractor is not an employee.Independent contractors are self-employed, meaning that they work for themselves, though with different clients. But a self-employed person may or may not be an independent contractor. For example, if you sell your art through an ecommerce store, you are self-employed. But you're not an independent contractor. That’s because your customers can purchase your art online, not by hiring you for commission work, which could be considered independent contractor work.

Can You Get a Loan as an Independent Contractor?

It may be confusing, since much of the lingo for loans online talks about companies with employees. But as a self-employed person or an independent contractor, you may be eligible for certain online business loans, including a self-employed SBA loan.The most popular SBA loan for self-employed people recently was the Paycheck Protection Program loan, which provided relief for businesses hit by COVID-19. This was available to all qualifying small businesses, including the self-employed and independent contractors. But as of right now, that program has closed. However, there are still what are considered grants for independent contractors, self-employed people, and other small businesses that applied if they qualify in how they used the funds to keep their businesses open during the pandemic. If you received PPP funds and qualify for the forgiveness program, you may not have to pay back some or all of what you borrowed from the SBA at that point.

Getting an SBA Loan When You're Self-Employed or an Independent Contractor

Let’s take a deeper look at currently available independent contractor SBA loans, as well as other loans for which you may be eligible.

SBA Loans

You may qualify for an SBA loan for self-employed people, independent contractors, or small businesses. The SBA’s 7(a) program is the most popular SBA loan program, and you can borrow up to $350,000 with the 7(a) Small Loan.You may need to provide collateral for these loans.There are other SBA loans you may also be able to qualify for as an independent contractor or self-employed individual. These include the following:
  • The SBA Express loan. Loans of up to $350,000 on an accelerated schedule. The SBA will respond to your application within 36 hours.
  • The SBA Export Working Capital loan. Loans up to $5 million for working capital for businesses that can generate export sales. 
  • The Veterans Advantage program. Provides fee relief to veteran-owned businesses.

Eligibility Requirements for SBA Loans

To qualify for an SBA loan for self-employed workers, independent contractors, and/or small businesses, you must do the following:
  • Operate for profit (in other words, not run a nonprofit)
  • Do business in the US or its territories
  • Have reasonable owner equity to invest in your company
The SBA also requires that you have used other financial resources, such as personal assets, before you apply for an SBA loan.Depending on your specific lender, your personal and business credit scores may be considered, as well as other financial data, during the lending process.

How Much You Can Borrow with an SBA Loan

How much you can borrow with an SBA loan for self-employed workers depends on which program you apply for, as well as your finances.Most standard 7(a) loans have a cap of $5 million. As an independent contractor, however, you might decide to apply for a 7(a) Small Loan, which has a cap at $350,000.If you’re in the export business, the Export Express loans allow you to borrow up to $500,000.

How to Apply for an SBA Loan for Self-Employed and Independent Contractors

The first step, as you’re figuring out how to get a business loan with the SBA, is to understand that you don’t apply directly with the SBA for an SBA loan. You apply through a bank or lender that offers SBA loans for self-employed individuals (preferably ones for which you can qualify).Each SBA lender may have a slightly different process, but you can expect to be asked for basic information about your company, including financials like your profit and loss statement. You’ll likely also be asked to provide some personal details, too, including your Social Security number.SBA loans may take a month or longer to process, so it’s a good idea to apply well before you need the funds.

Alternatives to SBA Loans for Self-Employed Workers and Independent Contractors

As an independent contractor or self-employed worker, SBA loans are not necessarily your only option. You might also consider the following loan sources.

Bank Loans

Another option you may have is an independent contractor loan or line of credit from a traditional bank or credit union that is not an SBA lender. This funding often offers low rates, but it may be more challenging to qualify for than SBA loans if you don’t have excellent credit.

Online Loans

If you can’t qualify for an SBA or bank loan, you might want to consider looking at options from an online lender. Some online lenders may evaluate qualifications other than credit scores for loans to self-employed individuals. These rates may not be as competitive as they could be for SBA loans or traditional bank loans, however.

The Takeaway

The SBA loan for self-employed individuals or independent contractors is just one of your options. You can explore more small business loans you might qualify for with Lantern by SoFi and get multiple offers within minutes.
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC0621116

Frequently Asked Questions

Can you get a small business loan if you're self-employed?
How do you calculate your payroll or salary?
How can you calculate your loan amount?
What is the definition of an independent contractor?
Are independent contractors eligible for loans?
How can I apply for a 1099 loan?

About the Author

Susan Guillory

Susan Guillory

Susan Guillory is the president of Egg Marketing, a content marketing firm based in San Diego. She’s written several business books, and has been published on sites including Forbes, AllBusiness, and Cision. She enjoys writing about business and personal credit, financial strategies, loans, and credit cards. Follow her on Twitter @eggmarketing.
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