Self-employed business loans

Candlestick makers, dressmakers, bakers, video game makers – the self-employed and sole traders are some of the nation’s most entrepreneurial workers.

However, like most businesses, there are times when the self-employed need a business loan. But what kind of loans are available, and what do you need to secure them? Read on the find out all you need to know about business loans for the self-employed.

What loans are available for the self-employed?

Just because you’re self-employed, it doesn’t mean you can’t get a business loan. Lenders may require more paperwork from sole traders and the self-employed than they would from fully employed borrowers or larger companies, but there are still finance options for those who work for themselves:

  • Unsecured loan: Similar to a personal loan. It does not require you to provide security (collateral) to the lender. Unsecured loans are primarily based on your credit history and personal income instead of your business’ performance. A good credit score is typically required to obtain an unsecured loan, and the sum you can borrow may be less than you may secure with other finance options.


  • Small business loan: Works like a regular bank loan and is issued for business purposes. The lender will usually check your personal and business credit score as part of the due diligence process. Your business records will also be reviewed to assure the lender that your business generates enough income to cover the repayments.


  • Secured loan: You provide collateral to protect the lender from loss. In most cases, this means property, such as your home, although other hard assets may be considered by some lenders. Secured loans usually come with lower interest rates and may offer a higher loan amount than unsecured borrowing. Bad credit can also be less of a problem with this type of loan.


  • Guarantor loan: If you credit history has some issues that make it difficult to obtain a loan, you may wish to ask a relative, friend, or business associate to act as guarantor for your borrowing. This means they are liable for any loss should you default on the loan. Your guarantor will need a good credit record and may even need to provide collateral. Guarantor loans tend to have higher interest rates and fees than some other types of loan. 

Top tip: Don’t get caught out by an error on your credit report, always check your personal and business credit scores before you apply for loan refinancing (secured or unsecured).

What documents do I need to apply for a loan as a sole trader or self-employed?

The documents you will need to secure a loan will vary from lender to lender and for the type of loan you are applying for. However, most lenders will need to see:

  • Bank statements – up to the last three years.
  • Tax returns – this is your SA302. You will need at least the last two years. You can get these documents by logging in to your HMRC account and downloading your SA302 calculations.
  • Company/business information – incorporation documents for limited companies, overview of the business, list of major clients, balance sheet and cashflow forecast if you have them.
  • Proof of any other income – such as dividends, bonuses, or rental income.

Does my self-employed status affect my loan value or rate?

No. If your credit is good and you have all the necessary documents, the interest rate you pay and the amount you can borrow should be no different than for fully employed borrowers.

Can I get a self-employed loan if I have bad credit?

Even if you have bad credit and have been turned down elsewhere, it may still be possible to secure the loan you need.  Note that weak credit may mean paying a higher interest rate, and, depending on the type of loan you are seeking, some lenders may also ask you to provide collateral to secure the loan.

What am I able to you use the loan for?

General self-employed and sole trader loans can usually be used to cover any business need. However, some loans may only be used for specific activities. 

Loans for specific activities:

  • Asset finance and refinance: Pay for plant and machinery, including commercial vehicles. Refinance your current equipment loans, or free up the sunk capital in hard assets that your business already owns to gain ready cash.


  • VAT loans: Pay HMRC on time to avoid hefty penalties. The lender pays the taxman direct. You repay the loan over 3, 6, 9 or 12 months.


  • Startup loan: Borrow up to £25,000 to get a new business off the ground. UK Government support may be available for this type of loan.

Get started with Swoop

Whether you need a loan to grow your business, cover a cashflow dip, or even pay your taxes, there’s a self-employed and sole trader loan for you. Don’t waste time going from lender to lender. Register with Swoop to access the widest range of loans at the best rates, and with the best terms and conditions. One click is all it takes. Get the self-employed loan you need today.


Written by

Chris Godfrey

Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.

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