Most independent contractors hesitate to apply for an independent contractor loan. Unfortunately, they are missing out on the benefits of loans for independent contractors for their businesses. Why should you apply for one of these loans while others like you have second thoughts?
Below are some excellent reasons for applying for an independent contractor loan.
They Plug Cash Flow Gaps from Delayed Payments
No matter what industry you’re working in, delayed payments are inevitable. One reason for this is the term contract. These contracts don’t require your clients to immediately pay for services rendered. You’ll have to wait until the term matures. This could come between 30 and 60 days.
You may apply for invoice financing to convert those pending invoices into cash. This form of financing can give you up to 90% of the total amount due ahead of those invoices’ maturity. Alternatively, you can also apply for small loans that give you up to $5000 in cash advances. You can repay these with a fixed percentage of your monthly earnings.
Loans Normalize Fluctuating Income
Your clients may be paying your company on time, but that still doesn’t guarantee a fixed income. Some of your clients’ contracts will expire, for instance. Your revenues for that particular month will definitely be lower than the previous month if they don’t renew their relationship with you.
In this case, you will find it challenging to keep up with your utilities, debt repayments, and labor costs. Independent contractor financing will cover these obligations until you secure new revenue sources.
Financing for Independent Contractors Help You Expand
Expansion is a goal that every independent contractor aims for. However, implementing growth requires planning and financing. Your small business’ cash reserves may not be enough to cover the costs. It is also a bad idea to spend your cash expanding your business.
With independent contractor loans, you can borrow money to purchase new equipment, secure property leasing, and guarantee your employees’ salaries for the next few months. Your monthly repayments will not put too much pressure on your cash flow as long as you carefully plan the expansion.
Loans Can Keep the Business Afloat During Catastrophes
A sudden economic crisis could force small businesses and independent contractors to close shop. The ongoing pandemic has kept many small businesses in the United States from reopening even in 2022. Many more were unable to recover and have decided to permanently cease operations.
Financing can help ease the strain on cash flow caused by these predicaments. The Small Business Administration’s Paycheck Protection Program, for instance, has extended nearly $800 billion in emergency assistance to COVID-hit small businesses until the program ended in May 2021.
Financing Can Help You Build Credit Score
Pledging an existing asset as collateral is the only way self-employed individuals with fluctuating income can qualify for financing. While there is a risk, these secured loans also present gig workers with an opportunity to build their personal credit scores. You just need to stick to your repayment schedule as much as possible.
Having a good credit score qualifies you and your independent contracting company for more financing options in the future. These would include unsecured term loans and business lines of credit.
Types of Financing Available for Independent Contractors
Here are some loans that independent contractors can qualify for:
As mentioned earlier, invoice financing lets you advance cash against your accounts receivables. You can use the funds to pay bills, fund your payroll, or pay debts. Lenders generally finance up to 90% of your unpaid invoices and take on the collection of the remaining 10%. They will deduct a small fee from the balance as payment for their services.
$500 to $2000-Loans
Independent contractors and gig workers can now apply for cash advances online. They just need to register for an account at a lender’s website and link their bank accounts. Lenders will only take a percentage of revenues deposited to their bank accounts as payment every month. It’s a very flexible method of financing, from which contractors can borrow up to $2000.
Office equipment is prone to breakdown. Equipment financing can provide your independent contracting company the funds that you can use to acquire new utilities. Approval times are quick, ensuring that you get back to operating as soon as possible.
Secured loans extend financing to small businesses with valuable assets to pledge as collateral. The collateral significantly reduces the risk for lenders because they can seize and auction it off in case of default. They might charge lower interest rates as well. However, they have specific criteria on what assets they will accept as collateral.
Fluctuating revenues should not be a reason for you to miss out on the benefits of financing. As an independent contractor, you have access to alternative forms of funding like equipment financing, asset-based loans, invoice financing, and cash advances of up to $2000. These loans can be a big help when you find your independent contracting company in a pinch.