Bridging loan for the self-employedOn September 9, 2019 by Manuel Laforce
A self-employment bridging loan is a short-term and flexible loan granted to ensure liquidity. This is needed in the event of a temporary shortage of liquidity, which is more likely to occur especially among the self-employed who, unlike employees, often have very irregular and variable monthly incomes. For the reasons just mentioned, however, it is often not easy for self-employed people to get a bridging loan.
Types of bridging loans
The bridging loan for the self-employed can be offered in different forms, which makes the comparability of the offers not easy. The easiest way to increase the financial flexibility in the short term is to increase the disposition credit by the house bank. However, this is also associated with relatively high interest rates. The interest rate increases even more if only an approved overdraft of the discretionary credit is granted. The better alternative to this is to have lower-interest loans over a short period of time, where the repayment can be either in one sum or flexible.
A classic installment loan can be an alternative to the bridging loan for the self-employed and freelancers, but is not always the ideal form of financing due to the longer duration, especially if only a short period of time really needs to be financially bridged. It may also be difficult for self-employed to pay monthly installments in the event of a recurrent shortage of liquidity, as the monthly installment can not usually be flexible.
Prerequisites for the loan approval of freelancers and self-employed
Although there is a legal distinction between self-employed and freelancers, it plays almost no role in awarding a bridging loan. Lending to the self-employed and freelancers is often tied to stricter criteria. Thus, a bridging loan for the self-employed is partially approved only after a certain number of years of self-employment or self-employment can be proven. Mostly at least two to three years must be proven. The terms of a bridging loan depend, on the one hand, on the creditworthiness of the applicant, but on the other hand, more evidence of collateral to approve the loan is often required. From both factors as well as the in-house conditions of the bank then the height of the interest rate results. In addition, there are also offers in which a lending without credit query takes place. But because of the higher risk for the lender, these offers are usually associated with less favorable interest rates.
The banking group, which emerged from the loan, for example, offers self-employed a low-interest business loan. However, this is bound to certain conditions. So he should only be used for investment in the company or the purchase of equipment.
In order to find the best self-employment bridging loan for self-employed people, the duration and amount of additional financial needs and repayment options should be realistically assessed in order to find the best deal by soliciting various offers or engaging a credit intermediary.