UK
IRE
AU
CA
US
ZA
NGExpert financial copywriter
Self-employed workers or independent contractors looking for funding may consider loans from the U.S. Small Business Administration (SBA). SBA loans can be used for a number of small business needs, including paying for marketing, expanding inventory, or buying equipment.
Find out who qualifies as self-employed, which SBA loans may be available and how to qualify.
Page written by Kat Cox. Last reviewed on August 15, 2024. Next review due October 1, 2025.
Because the SBA deals with small businesses, they don’t provide a definition of “self-employed” workers. But the Internal Revenue Service (IRS) defines anyone as self-employed if:
Usually business owners who have a limited liability company (LLC) and are sole proprietors or partnerships qualify as self-employed.
In order to qualify for a small business loan from the SBA, you will need to have an official business designation, such as an LLC. Because SBA loans are meant for businesses with fewer than 1,500 employees, anyone who is self-employed or a sole proprietor for an LLC may be able to qualify.
If you’re an independent contractor but don’t have a business designation like an LLC or an incorporation, you won’t be able to qualify as a small business for any SBA loans.
SBA loans are extremely popular because they’re backed by the U.S. federal government. They also tend to have longer application times and stricter qualifications, like a relatively good credit score, a few years in business and good annual revenue. But if you meet the lending criteria and are willing to put in a little leg work, SBA loans aren’t necessarily difficult to get.
To apply for an SBA loan while self-employed, you should follow these steps:
There are a number of SBA loans you might qualify for if you’re self-employed.
As the name suggests, an SBA microloan is a smaller business loan than traditional loans. SBA microloans lend up to $50,000 with an interest rate ranging from about 8-13% with a maximum repayment term of six years. Because they’re administered by a variety of lenders, your qualifications will differ depending on your lender. You can expect to need to provide collateral and a personal guarantee on top of the other qualifications, though.
As the most popular SBA loan, you can get up to $5 million from the 7(a) program if you qualify. You will need to have tried other sources of funding before applying for the loan. The SBA 7(a) loan can be used for commercial property, working capital and even inventory. The loan is variable based on a base rate plus anywhere from 2.25% to 4.75% depending on how much you borrow and the loan terms. You can expect a repayment term of up to 15 years for commercial real estate and 10 years for other types of loans.
As part of the SBA 7(a) program, the SBA Express loan is meant for small businesses who need cash fast. The SBA responds to these loan applications within 36 hours, which is much faster than the typical week it takes for other SBA loans. You can get a loan for up to $500,000 with an interest rate that won’t exceed the prime rate plus 6.5%. Repayment terms vary based on the type of loan you get, but can be 25 years for real estate loans, 10 years for other loans and seven years for a line of credit.
If you don’t qualify for an SBA loan or need something faster, there are a few alternatives you may consider.
Many small business owners choose crowdfunding to finance their businesses. With crowdfunding, you may ask a group of investors or even friends or family to buy into your business, either by promising them early access to a product or by giving them equity in your business. This is a particularly easy way to get money if you’re a sole proprietor or partner in a small LLC.
While not technically a loan, business credit cards can help independent contractors or self-employed business owners finance purchases for their businesses. You can also find a business credit card that has rewards, rebates or perks that match your small business’s needs. Small business credit cards can be a good way to fund your business while you build up credit or time in business to apply for a loan later. Just make sure you can afford the minimum monthly payment and be aware that the interest rate on credit cards can be very high if you don’t pay it off entirely every month.
If you can’t qualify for traditional loans, there are loans meant for startups and other small businesses. Online loans tend to have much shorter application processes and funding times, as well as somewhat looser qualifications or requirements. However, they also tend to come with shorter repayment terms and higher interest rates, so it’s important to read the fine print and make sure you can afford the loan before you apply.
Every self-employed person will have different needs for their business, so finding the right loan means asking yourself the right questions. A few you should consider include:
To work out the monthly repayments of your loan, use our SBA loan calculator here.
Swoop can help you find the right loan for your needs fast. Sign up on our app and answer a few questions to get started today.
Written by
As a B2B finance content specialist, Kat Cox's goal is to distill complicated financial issues into useful information for small business owners, to save them time they could be using to build their companies. Her work has been featured in Forbes and on financial health platform Nav.com. When she's not writing blogs, web copy, or fiction, Kat can be found walking her dog or singing karaoke in Austin, Texas.
Swoop promise
At Swoop we want to make it easy for SMEs to understand the sometimes overwhelming world of business finance and insurance. Our goal is simple – to distill complex topics, unravel jargon, offer transparent and impartial information, and empower businesses to make smart financial decisions with confidence.
Find out more about Swoop’s editorial principles by reading our editorial policy.
Daire made it happen! There is no doubt that Swoop sped up the process and found lenders that worked to our time scale rather than the other way round
Joint owner, F45 Virginia
Swoop was actually very helpful in helping us get our initial fundraising in place. Swoop was able to connect us with investors, with grant financing options and debt financing options.
Founder, SingleKey
Pedja was amazing. Super supportive, understanding of our needs and wasn't pushy at all. We've been going back and forth with Swoop for over a year inquiring about different financing options and they were patient until we were ready!
F45 Multi-studio owner
yet? Register here!