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Small Business Loans for Sole Proprietors: Here's What You Need to Know

If you run a business on your own such as a landscaping business, freelance writing, or even book-keeping business, you most likely fall under the category of a sole proprietorship. 


A sole proprietorship is the most straightforward and typical structure chosen to start a business. It is an unincorporated business owned and run by one individual with no distinction between the company and you, the owner. You are entitled to all profits and are responsible for all your business' debts, losses, and liabilities.


This form of business is prevalent due to the simplicity of setting it up. A business owner only needs to register his or her name, secure local licenses, and optionally create a business or trade name. Every aspect of a sole proprietor business is in the business owner's name, even if there is an associated trade name for the company; this includes bank accounts for the business.


While this may seem enticing for many individuals, it may sometimes be challenging to raise funds or get business loans as a sole proprietor. Sole proprietors often face challenges when trying to raise money. Since you can't sell stock in the business, this limits investor opportunity. Banks are also hesitant to lend to a sole proprietorship because of perceived additional risk for repayment if the company fails.


However, while this is often the case, sole proprietors can obtain funding. Here are a few small business loans for sole proprietor:


Sole Proprietor Bank Loans


Bank term loans and a lines-of-credit are the superior financing option for all businesses, including sole proprietors. Rates can start reasonably low, and terms can range into the decades. These rates can range from 5-10% for a period of up to 10 years. To apply for a loan, a sole proprietor would need to provide the following documents:


Sole-proprietor's tax returns 

Sole-proprietor's income statements 

Sole-proprietor's balance sheets 

Schedule of liabilities 

Personal financial statement


Alternative Business Loans


Alternative sole proprietorship loans are another suitable option for sole proprietors who may not get traditional financing via banks. Alternative loans for sole proprietorships usually require minimal documentation; however, they come with higher rates at shorter loan terms. The rates can range from 8-25% for periods ranging from 1-5 years. Documents needed for sole proprietorship alternative lending include:


Sole proprietorship's tax returns (2 years)

Sole proprietorship's income statements (year-to-date)

Sole proprietorship's balance sheets (year-to-date)

Schedule of liabilities


Sole Proprietor Cash Advance


A final option available for sole proprietors is a Cash Advance. Cash advances are the sale of the sole proprietor's future earnings in exchange for upfront financing. The process is usually straightforward, and funding can be disbursed in a short period. Rates for cash advances can range from 1- 2%, depending on the terms and the business sales history. Documents needed for a sole proprietor cash advance usually include the application and bank statements or credit card statements. This is dependent on the lending institution. 


Sole Proprietors need not despair. There are several options available despite the unique challenges they may face. If you want more information, browse our website - to apply for a loan option that is right for you.

Please fill out the below application to get an offer within 24 Business hours!

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