When you are a business owner as a 1099 worker or an independent contractor, you handle the responsibilities and manage your working hours. You also enjoy the possibility of increasing your earning potential as a 1099 worker, but all those perks don’t protect you from the hurdles you face being self-employed.
For starters, your monthly income is never a fixed amount. It could be high in one month and lower in the next month. You also receive no employee bonus as corporate workers get from time to time. However, you can accept the same terms and conditions for loans as 9-5 workers and have the same resources. So, if you want to expand your business, taking out a loan could give you the boost you need. Here’s a guide to know how to get a loan as a 1099 worker.
What Is a 1099 Worker?
Many businesses and companies contract a 1099 worker for various types of work. The work is frequently project-to-project basis or independently. This means that 1099 workers don’t have a fixed monthly income and can decide how many projects they do in a month. It gives them more autonomy over work, but they will not get the usual employee benefits like retirement savings, health insurance, and bonuses.
Challenges That Come With Being a 1099 Worker
Being an independent contractor gives you more freedom and autonomy with your work. However, it also has its challenges. The most important thing is that you won’t have a fixed monthly income, so there’s no guarantee of a monthly salary. You are also responsible for all business expenses, which sometimes can be too much.
What Are Loan Options Available to 1099 Workers?
1099 workers can be eligible for unsecured & secured personal loans, business credit cards, variable rate loans, debt consolidation loans, payday loans, and lines of credit. A 1099 income personal loan may sound risky, but it’s one of your best options. We will also dissect which options would be best for a 1099 worker.
Are 1099 Workers Eligible to Qualify for SBA loans?
If you have legally registered your business as a Sole Proprietorship, operate for profit, and have business in the US or are planning to do business in the US, you will be eligible to qualify for SBA (Small Business Administration) loans.
You can qualify for PPP or Paycheck Protection Program as a Sole Proprietorship or self-employed worker.
Best Loan Options for 1099 Workers
Some loan options may be easier to qualify as self-employed workers, independent contractors, or 1099 workers. Make an intelligent decision, look into all available options, and meet with a financial consultant if you are still uncertain. Let’s compare some of the best to understand how they would work for you.
1. Unsecured personal loans
Unsecured personal loans require no collateral asset, making them a safe option for all self-employed people. Even if you default on the loan, your assets are still safe. Defaulting can, however, damage your credit score badly. It would help if you had a reliable income and a good credit score to get yourself approved for a larger low-interest personal loan. Most unsecured personal loans have fixed terms & conditions throughout the loan term, so you can prepare accordingly.
2. Lines of credit (for personal or business)
Personal & business lines of credit are similar to credit cards but have lower interest rates. Once you qualify for a line of credit, you will receive a credit line with a fixed amount and will be required to pay an interest rate on the portion of money you use from the total. Lines of credit are an intelligent option for 1099 workers, as they can help you if the business is dwindling or you need financing for unpaid projects.
3. Debt consolidation loans
If you have multiple longstanding debts totaling an amount more considerable than your revenue or monthly profits, a debt consolidation loan can help you pay off all the debts. Slow months are unavoidable when you’re self-employed. A debt consolidation plan could help you pay off the debt while keeping your home base covered if you had taken out loans during such times to manage the expenses. However, to get approved for a debt consolidation loan, your total loan amount should be less than 50% of your income, and you must have a stable monthly income.
Getting a loan as a 1099 worker may seem impossible, but depending on your financial situation, there are several loan options that you may qualify for. We hope this helps you understand what options are available to you. Look into them all before you take any decision.