Borrowing money as a self-employed or freelancer is difficult. Nevertheless, practically every company works with outside financing. The contribution provides information on where this money comes from, which financing options are particularly cheap, but also on risks.
Borrow money – start independently
Successful independence is not given to anyone. In addition to a good business idea and the know-how to implement it, start-up financing plays a decisive role. Borrowing money, building the company with outside capital is often inevitable. But where should the money come from? The company does not yet exist and very few have large reserves. The start-up financing solution is heavily advertised. A successful start-up company is financed through a start-up loan from intrasavings bank.
For business start-ups, it is not possible to borrow money directly from intrasavings bank. The state development bank only secures the loan. Any commercial bank can be the contact for the loan request. In many cases, it is the bank’s clerk who provides the first information about the possibilities of government loan support. Unfortunately, it’s not quite as simple as it may sound on the intrasavings bankwebsite and in the preliminary credit talk. There are a lot of formalities to be followed so that the state is ready to be liable for the loan.
Most of those who want to build their own livelihood are experts in their field, they feel overwhelmed by the ubiquitous bureaucracy. Intrasavings bankis also aware of the problem, which is why it offers to co-finance the right business expert. The best interest conditions and a repayment plan tailored to self-employment are the prize for the effort. Borrowing money, many freelancers unfortunately only realize this late, is still comparatively easy at the start of self-employment.
Borrow money from private – credit portals provide liquidity
At the start of the company, the state development bank bridges the otherwise impending financial crunch with its guarantee. If the company is still running, there are still other funding opportunities, but the state is withdrawing. Additional funding is only provided if the entrepreneur can otherwise secure a significant proportion of the credit risk. In the early days, the first five years of self-employment are the hardest, securing credit is difficult.
Investors willing to take risks must step in. Borrowing money privately, through portals like Trucredit or Centiloan, becomes interesting. Private investors, mostly small investors, do not judge credit requests by the standards of a bank. As a private individual, the investor is not bound by the conditions of the Basel contracts. Private investors lend their money according to their own standards. They look at the return and often rely on their “gut feeling”.
It is precisely this concept that makes private credit so interesting for self-employment. Crowdfunding (borrowing money from the crowd) in the early years was based on the idea of building high-risk financing on many investors. Each individual investor only invests a small amount. If the project is successful, he will be rewarded with high interest. However, if things go wrong, the individual investor only loses a small amount of money. That may be annoying, but it is not a threat to existence. In the difficult early years, “borrowing money from private” has a permanent place in the financing system today.
Borrowing money – regular loan offers for the self-employed
Even self-employed and freelancers are not completely denied the ability to borrow money on a regular basis. As with the start-up loan, it is advisable to entrust yourself to an economic expert. In theory, a loan with the WAB is very easy to obtain. In practice, the hurdles are so high that even good tax consultants often fail. The correct structure of the WAB is important. Not everything that the tax office accepts is also suitable for borrowing money.
The clerk is often not an expert in extracting the right data from the WAB itself. It is not his job either. He expects “bite-sized” data sets and numbers. His program checks whether a loan can be granted in accordance with the legal situation. If the WAB delivers the wrong specifications, the correct tax, the wrong business, the rejection of the loan is preprogrammed.
Many self-employed cannot afford the right software used by large companies. From a company size of around 500 employees, software solutions are used that deliver a “suitable” WAB at the push of a button. Borrowing money is easy with the right software, but it’s not profitable. For start-ups, data entry and the purchase of such software would be unprofitable. A craft company with 50 regular customers cannot possibly employ a highly qualified full-time employee for data entry only.
The small company would also have no advantages from the evaluations that are possible in this way. In small companies, the boss still makes the decisions and not the software. This flexibility is the decisive competitive advantage over large companies.
Loans for the self-employed – who lends money on credit problems?
The credit market is paradoxical. An entrepreneur provides easy credit approval for his employees who are subject to social security contributions. Borrowing money is relatively easy for the employee due to the regular wage payments. The entrepreneur pays the wages, but his own financing requests rate his income as “unsafe”.
He has three options to borrow serious money. He can apply for a loan through Trucredit, contact a pawnbroker, or hire a broker. Van credit, for example, provides loans for the self-employed and freelancers. The loan application to established intermediaries can be prepared online. Entering the data takes little time.
The intermediary then examines the credit opportunities. Credit sources are addressed that nobody can easily discover on their own. About 20 special providers can be requested with just one application via Van Kredit. If the lender’s response is positive, borrowing money through an intermediary can be almost as fast as it is for employees.