Sole Proprietor Loans up to $250,000
We’ve helped hundreds of sole proprietors get approved for up to $250,000 in funding in less than 2 business days! Complete our fast no obligation online application, with no impact to your credit, to see how much you may qualify for.
Sole proprietor loans, also known as sole trader loans, are an advantageous option to consider for anyone starting or running a sole proprietor business. Sole proprietor loans give small businesses that qualify a chance to jumpstart their business or give existing businesses a boost. Sole proprietor loans can help those who own their own business cover expenses in inventory, marketing, and working capital, to list a few.
Loans for sole proprietors, or loans for sole traders, are often smaller than other traditional business loans. They typically range from a few thousand dollars to up to $250,000—a great option for sole proprietors and their budding businesses.
What Is a Sole Proprietorship Business?
Sole proprietors, or sole traders, are anyone who operates a business independently where there is no difference between the individual and the business. The individual is responsible and entitled to all capital gains and losses. Sole proprietor businesses, or sole trader businesses, are a common structure and are easy to declare.
It is possible you are a sole proprietor and not even know it. A sole proprietorship is run by self-employed individuals, such as hairstylists located from their homes or renting chairs in studios. Freelance and independent contractors are also sole proprietors. An artist can be a sole proprietor. A handyman can also be a sole proprietor.
As long as the individual operates their business so that they are the business, responsible for work and finances, they operate a sole proprietor business or sole trader business.
What Are Sole Proprietor Loans?
Sole Proprietor loans function like any other personal or business loan. Essentially, sole proprietors borrow money from a financial institution to build their business. The money is paid back in methods specific to the type of loan. They are often smaller in terms of amount due to the general risk of lending money to less-established businesses and those with fewer assets.
Sole proprietor loans come in several forms and can fall under the umbrella of a personal or business loan. Both have advantages and disadvantages. Sole proprietors should understand their options and make the best choice specific to their situation.
How Can Sole Proprietor Loans Be Used?
After understanding sole proprietor loans, a prospective business owner should know how to use the funds. The loans are to be used to build or grow your business.
A sole proprietor loan, or sole trader loan, can be used for:
- Day-to-day operations: A sole proprietor can use funds from a loan to afford everyday expenses. For example, a handyman needs to pay to repair their tools, or a photographer needs to pay for a train ticket to shoot a wedding.
- Inventory and supplies: Sole proprietor loans can provide funds that allow a housekeeper to purchase cleaning supplies or the hairstylist to maintain inventory to sell to clients. If you need it to operate your business, it can be spent through the funds from the loan.
- Marketing: Proprietor loans can be used to expand the reach of your brand. For example, the funds can allow a fitness coach to purchase ads on social media or take out an ad in a publication.
Sole proprietor loans allow for more freedom in fund allocation that otherwise would not have been possible. However, running a small business calls for tight budgeting. Both crucial to business growth, marketing, and advertising are often sacrificed to make tough decisions.
Funding Solutions for Sole Proprietors
Loans for sole proprietors come in many forms, and one funding solution may be a better fit than another. Banks and other financing options consider the proprietor’s credit and business strength. A good business plan and a strong model will give you a better chance at receiving a loan.
Poor credit will make it difficult to get a small business loan directly from the bank, so the business owner should seek other options such as an SBA 7(a) loan. The 7(a) loan from SBA (Small Business Administration) is popular for sole proprietors. Borrowers can receive a 7(a) loan up to $5 million with an interest rate not exceeding 13.50%. It is a loan program that can assist a proprietor in funding their supplies and business expenses. In addition, the 7(a) loan is an option for businesses struggling with the stricter, more rigid restrictions that a bank requires.
The business line of credit is another funding solution for sole proprietors that is an alternative to a traditional loan from the bank. The business line of credit allows the proprietor to access a predetermined, finite amount of funds from the lender. The proprietor only withdraws what they need and only pays interest on what they use, not what they do not. This allows the proprietor to take out funds to finance a marketing opportunity for growth or to purchase essential supplies.
A business line of credit is a reasonable option for small businesses that are established. However, new businesses might struggle to be approved for a business line of credit as they are funded through banks. Lines of credit are different but similar to credit cards.
Credit cards are an option for sole proprietors and are easy to qualify for. Business credit cards are an option for daily expenses like paying for lunch, gas, or supplies that your business runs through frequently. Credit cards also often come with rewards, so a proprietor could benefit in the future if they manage their credit properly.
Whenever you take out a loan, you must pay it back, which can lead to debt. Merchant Cash Advances (MCA) are options for sole proprietors to get increased funding without incurring debt. MCA allows small business owners to borrow money for their own future sales to fund something now and area available with a credit score of 500+.
Invoice financing is similar to MCA in that you take from future earnings to receive funds immediately. In this case, you send a copy of a pending customer invoice to an invoice financing provider to receive those funds immediately. When your customer eventually pays you, you settle up with the lender.
Pros and Cons of Sole Proprietor Loans
Pros
- Kickstart your business
- Expand and grow existing business
- Increased spending freedom
- Access to opportunities previously restricted by a tighter budget
- Build your business credit history
Cons
- Business Debt
- Interest
- Institutional rules and formalities
- May need to use personal assets as collateral
How to Apply for the Best Sole Proprietor Funding
Eligibility Requirements
To be approved by mCashAdvance, you satisfy the following requirements:
- U.S. citizens and legal residents only
- 18 years+ old
- Your business must be at least six months old
- 500+ credit score
Funding Limits
Eligible sole prop businesses may qualify for up to $250K in funding. A review of your business finances will determine approval amounts.
Term Length
The repayment terms typically range from 1 to 5 years. This may vary depending on the amount of funding you receive and your sales.
Sole Proprietor Frequently Asked Questions
Is a Sole Proprietor a Business Entity?
Yes. Business entities are any organization formed to do business. A sole proprietor is a type of business entity.
How Can Sole Proprietors Improve Their Chance at Business Loan Approval?
Sole proprietors can improve their chances by building a strong business plan to share when applying for a loan. Build business credit and apply after being in business for at least six months.
How Hard Is It to Get Approved for a Self Employed Business Loan?
It depends. Getting approved for self employed small business loans are difficult if you have poor credit, are a brand new business, and did not research what loan is suitable. On the other hand, getting approved is not difficult with an established business, a thorough business plan, and good credit.
What Is the Best Business Loan for a Sole Proprietorship Business?
The best business loan is contingent on your unique situation. Newer, small businesses will find success with the 7(a) loan, while more solid, established businesses with more significant needs may look directly to a business loan from the bank. Lines of credit and credit cards are suitable for most sole proprietors as they are effective for day-to-day business expenses.
Can You Get a Sole Proprietorship Loan With Bad Credit?
Getting a sole proprietorship loan with Bad credit is difficult. Instead, try building your credit score with a small business credit card, or consider utilizing a merchant cash advance or invoice financing to give you the boost you need.
Can a Sole Prop Use a Personal Loan?
Technically yes, you may utilize a personal loan to fund your sole proprietorship if documented correctly. Personal loans are typically easier to qualify for as well. However, you should be careful mixing business and personal assets though.
Funding Your Business Is Our Business
Sole Proprietor Loans Can Grow Your Business
A sole proprietorship is a noble and sometimes scary journey to embark on. It is simultaneously empowering and frightening to be the only one in charge of whether you sink or swim. Sole proprietor loans exist to assist those on that journey. No one can do everything alone. Do your research, pick the best sole proprietor loan for you, work hard, and enjoy the freedom of working for yourself.
Don’t Allow a Lack of Funding
to Hold your Business Back
It’s Time To Move Your Business Forward!