Of course, there is also a need for financing for the self-employed, as for employees, civil servants or pensioners. However, banks and savings banks assess self-employed people and freelancers differently than people who earn a regular income as part of an employment relationship – because, according to the banks, the risk of a bank loan for self-employed people is higher that the money cannot be repaid.
Short-term, medium-term or long-term financing
When it comes to a loan for the self-employed, banks distinguish between short-term, medium-term or long-term financing needs.
For a short-term financing for the self-employed, the current account credit is primarily suitable, which should primarily be used to finance working capital. Since the overdraft facility for the self-employed is more of an expensive loan, the credit line should not be used for longer than a maximum of 12 months.
The amount of the overdraft facility is always determined individually, as a rule of thumb should apply: amount of monthly sales = amount of overdraft facility for entrepreneurs. The overdraft facility should only be used when it is really needed, for example in the event of short-term liquidity fluctuations.
Medium and long-term financing
Medium and long-term financing needs, investment loans with a term of twelve months or more are used
Such a bank loan for the self-employed can be used to finance fixed assets – for example a fleet, machines, buildings and land. However, the bank ensures that, on the one hand, there is an adequate amount of equity and, on the other hand, that the required investment conforms to the economic useful life. The longer the term of the loan is chosen, the lower are the monthly repayments to be paid to the bank, which gives the entrepreneur the financial options a relatively large amount of financial freedom of movement.
The amount of interest in turn depends on the creditworthiness of the borrower, which the bank examines in the course of the loan application. In the case of the self-employed, the valuation of the company he runs naturally plays a significant role, but the collateral that can be provided to the bank to reduce risk is also important.
take out a bank loan
Self-employed people should not be afraid to take out a bank loan and incur corresponding debts
Nevertheless, they should always check in advance to what extent, at least to a certain extent, they can implement the planned project using their own financial resources.
Credit terms are negotiable – even with a loan for entrepreneurs. Those who appear confident and well prepared can score with the banks. If the loan application is rejected because the collateral provided is insufficient, it makes sense to inquire about collateral assistance at the state’s guarantee bank.