Loans for Independent Contractors with Bad Credit

Loans for Independent Contractors with Bad Credit

Being a 1099 employee allows you to choose when and where you work. However, this freedom comes with some financial difficulties, especially when getting a loan. Compared to traditional employees, self-employed individuals are more likely to face irregular income, resulting in limited access to credit cards and loans. Most banks and financial institutions prefer borrowers with regular income. This situation is even more complicated for those with poor credit.

More Info: Payday Loans Based on Income, Not Credit

A bad credit history can also challenge an independent contractor seeking a loan, as it can restrict access to extra financing and impose stricter conditions. However, viable solutions still exist. Several loan options cater specifically to 1099 employees, offering a glimmer of hope amidst the hardships. Explore the available financial support for independent contractors and familiarize yourself with the qualification requirements for these loans.

Table of Contents

  1. How Does a Bad Credit History Harm Independent Contractors?
  2. Does My Job Fall Under the Category of Self-Employment or Contract Work?
  3. What Independent Contractor Loan Options Are Available with Bad Credit?
  4. How Do You Qualify for Independent Workers and 1099 Worker Loans?
  5. Strategies to Improve Credit Score
  6. Conclusion
  7. FAQ

How Does a Bad Credit History Harm Independent Contractors?

A bad credit history signals to lenders that the borrower is likely to default on loans. This means that the lender takes a risk by issuing a loan to them, even if the contractor is solvent. A credit score is formed based on the following:

The credit rating scale ranges from 300 to 850 points. If a credit score falls below 670 on the FICO scale, it is considered subprime. In this case, getting a loan on favorable terms is difficult, and some lenders even refuse a loan. For 1099 workers, fluctuations in income can make it difficult to meet financial obligations on a timely basis, potentially leading to a lower credit score.

See also: Personal Loans for a 600 Credit Score

Does My Job Fall Under the Category of Self-Employment or Contract Work?

If you are self-employed and not considered an employee of another company, you are most likely a contract worker. Self-employed can be employees who work as:

This is just a small list of jobs that contractors can perform. You are a contractor or self-employed person unless you have an employment contract with a company.

You might be interested in: Emergency Loans with No Job - Options for Unemployed People

What Independent Contractor Loan Options Are Available with Bad Credit?

A variety of loan and financing options are available to independent contractors with bad credit. It is important to understand that a credit score is often a key approval factor, but it is not the only one for some loans. Here are a few options that may be considered:

Business Loans and Lines of Credit from The SBA

1099 workers with bad credit can use loan programs from the Small Business Administration (SBA). To qualify for an SBA loan, you usually need to run your own business, aim to make a profit, and operate within the USA. This applies to many different types of jobs and incomes. Here are a few SBA loan options a contractor can access.

SBA Microloan Program

The SBA microloan program is available to small businesses and independent contractors. It offers loans of up to $50,000 that can be used to purchase supplies and equipment. Interest rates range from 8% to 13%, and repayment terms typically range from 6 months to 6 years.

You can get such a loan from an intermediary lender. These are, as a rule, public, non-profit organizations. The criteria for receiving an SBA microloan are quite flexible - they are more focused not on credit history but on the borrower's solvency and the viability of the business plan.

SBA 7(a) Loan Program

7(a) loan programs are the principal means by which the Small Business Administration (SBA) extends financial support to small businesses. Such loans are intended for people with less-than-perfect credit scores and businesses that can't access traditional loans.

The SBA 7(a) loan program provides funds of up to $5 million to small businesses, including independent contractors. Interest rates typically range from 7% to 9.25%, and repayment terms can be up to 25 years depending on the loan purpose. There is no minimum score for a 7(a) loan, but most lenders prefer borrowers with a rating of at least 640.

SBA CDC/504 Loan Program

This program is intended for the purchase of real estate or large equipment. Loans are provided by certified development companies (CDCs), nonprofit intermediaries working with the SBA, and private-sector lenders that finance small businesses.

The CDC/504 loan program offers long-term, fixed-rate financing for 1099 workers who need to invest in significant assets. Interest rates for CDC/504 typically range from 2.5% to 4.5%, and repayment terms can be up to 25 years for real estate and 10 years for equipment. Like the 7(a) program, the SBA does not set a strict minimum credit score requirement, but borrowers need to demonstrate their ability to pay.

SBA CAPLines Program

The CAPLines program provides lines of credit for cyclical and short-term needs. This loan can be obtained by independent contractors whose cash flow is unstable, for example, if the contractor is not paid on time for services performed. Interest rates for CAPLines can range from approximately 7% to 9.25%, and repayment terms vary depending on the type of line of credit and specific terms, typically up to 10 years.

This program gives 1099 workers flexibility in controlling operating costs by allowing them to borrow against future earnings. CAPLines lenders focus more on a borrower's current ability to pay than their credit history.

Personal Loans for 1099 Employees

Independent contractors can apply for unsecured or secured personal loans, which are paid back in equal monthly installments. These loans can cover both personal and corporate expenses independent contractors face. Their interest rates range from 5.99% to 35.99%, with loan amounts of up to $50,000.

Even though getting approved for a personal loan with bad credit can be difficult, some lenders specialize in this kind of lending. However, you shouldn't count on affordable interest rates and accommodating payback terms.

Check out: How to Get Personal Loans for Self-Employed

Payday Loans

A payday loan has a short repayment term, usually 14 days or until the next payday. Such a loan is at most $1,000 (each state has rules regulating the amounts and interest rates). APRs on payday loans exceed 400%, so they must be treated cautiously. Late repayment can lead to a debt cycle. If you need money quickly and are an independent contractor, you can consider payday loans, but there may be better solutions.

Learn more about: Pros and Cons of Payday Loans

Credit Cards

Being self-employed does not preclude you from obtaining a credit card. Credit cards provide a zero percent annual percentage rate (APR) trial period. This lets you spend money without having to pay interest on what you use. You should repay the loan before the interest-free period expires because credit card interest rates can reach 29.99%. In addition, a solid credit history is required to be eligible for a credit card. Your financial status and credit score may suffer irreversible damage from careless credit utilization.

Cash Advance Apps

Cash advance apps may appear as a convenient solution for 1099 workers when finances are tight, but they can be expensive. These apps offer quick access to small sums between $50 and $500, often without charging any interest. However there may be extra costs for membership or instant deposits. Some apps may also require you to be officially employed.

More info for gig workers: Cash Advance for DoorDash Drivers

Title Loans

Title loans are a type of borrowing in which the borrower provides their vehicle as collateral. You could get a title loan with bad credit, but if you miss a payment, the lender could seize your vehicle, leaving you without the means of transportation. Often, title loans come with a monthly financing fee of up to 25%, which equates to an annual percentage rate of about 300%.

Peer-to-Peer Lending

When seeking a loan, 1099 workers may also consider peer-to-peer lending. This form of lending bypasses traditional financial institutions. People borrow money directly from investors via Internet platforms. Interest rates may be competitive, especially if your credit history is decent. Additionally, the application process is usually quicker and more streamlined than with banks. However, there might be extra costs related to the loan. In addition, defaulting on a loan might harm your credit report and result in collection actions, just like any other debt.

get a loan for independent contractors

How Do You Qualify for Independent Workers and 1099 Worker Loans?

The loan requirements may vary from one lender to another. Traditional financial institutions mostly focus on the borrower's credit history and income, while private lenders may be less picky. To obtain a loan, you usually need to provide the following documents:

In addition, lenders may request profit and loss statements, documentation of business ownership, and a business license or registration.

It is crucial to remember that prerequisites can change depending on the lender and the kind of loan. As a result, it is wise to inquire about the lender's paperwork requirements for 1099 employees in advance.

Steps to Get a Loan for a 1099 Income

To apply for a loan, you need to follow these steps:

Check the Opportunity to Get a Business Loan or Line of Credit from the SBA

You can take advantage of the lower interest rates offered by the Small Business Administration (SBA) to lower your overall loan cost. Aspiring entrepreneurs who do not have a decent credit history can also obtain financing from the SBA. However, if you need money urgently, it's better to consider alternative options.

Assess Your Financial Situation

Assess your income, expenses, and credit score to determine the extent of your financial needs. After this, determine the required loan amount that you can conveniently repay. A thorough analysis will help determine the appropriate type of loan and its size.

Explore Loan Options

Explore the variety of lending options available to 1099 workers. Analyze each option's interest rates, fees, and terms. If you need to finance a major purchase, consider a personal loan. For those who need to cover minor needs, ASAP Finance offers a swift and efficient way to address their financial requirements. Your application will be promptly reviewed, ensuring you receive the necessary funds without unnecessary delays.

Work To Improve Your Credit Score

If your credit score is insufficient to obtain the necessary loan, consider raising it. This entails paying on schedule, cutting debt, and following good spending habits. A high credit score makes it easier to get lower-interest loan offers.

Prepare the Necessary Documents

Try to provide the lender with as many documents as possible that prove your solvency, especially if you have a bad credit history.

Submit a Loan Application

The easiest and fastest way to apply is online. When filling out the form, you should provide correct information about yourself and avoid mistakes. Any errors may be considered fraud, so that you will be denied a loan.

Explore the Loan Offer

Wait for loan approval and review the lender's terms. Pay attention to interest rates, loan fees, the possibility of early repayment, and payment terms. Agree only when you are sure that you can afford the loan.

Get the Funds

Most lenders make money transfers via a direct deposit into your bank account. The funding times can vary widely, depending on the lender and the loan option you choose. It can take you from several hours to a few weeks to receive the loan amount.

Pay on Time

Repay your loan exactly on time. Refrain from making late payments to avoid penalties and exorbitant interest. Automatic payments are a great way to ensure you always remember a payment. Your credit history can be improved by repaying your loan on time. However, late payments can hurt it. If you face a problem, contact the lender, explain the problem, explore repayment options, or ask for a postponement.

Strategies to Improve Credit Score

Independent contractors and 1099 employees should maintain a high credit score to obtain a loan in a financial emergency. If your credit history is damaged, follow these steps to start working on it.

Request Your Credit Report

The three major credit bureaus (Equifax, Experian, and TransUnion) allow you to obtain a free copy of your credit report. Review it and report any inaccuracies you find.

Pay Your Bills On Time

Since your credit score is primarily based on your payment history, paying off debts on time is extremely important. To avoid missing payments, set up automatic payments or calendar reminders. If you have already made arrears, then you need to pay off the debt as soon as possible. The derogatory mark on your credit report will not disappear, but the negative consequences will be reduced.

See also: Loans To Help Pay Bills

Reduce Debt and Maintain a Low Credit Balance

Maintain a balance well below the limit on your credit card. Using less than 30% of your available credit is a good indicator. Also, if you have a lot of debt, pay it off in small increments. Prioritize paying off the loans with the highest interest rates.

Manage Your Credit Accounts

Don't apply for new loans frequently. Since many lenders conduct rigorous credit checks, many applications at a time can significantly lower your credit score. It's better to get pre-qualified from lenders, choose the most attractive loan offer, and submit your application. You are also advised to keep your previous accounts open. The length of your credit history affects your credit score.

Consider Credit Builder Loans

This type of borrowing allows individuals to improve their credit rating. It works like this: you apply for a loan, and the lender transfers an amount to a savings account, and you cannot withdraw it until you pay off the debt. Credit scores increase as information about on-time payments is reported to the major credit bureaus.


There are several ways for self-employed and contract employees to receive money. Options include private business loans, government SBA loans, personal loans, payday loans, credit cards, and other financial instruments. Each lender has different application requirements. While loans can be a good solution for immediate financial needs, it's worth carefully evaluating each option before making a choice.


Is it Hard to Get a Loan as an Independent Contractor?

Getting a loan as an independent contractor can be more challenging than as a traditional employee. However, some lenders offer loan products to 1099 workers, including those with bad credit. Providing comprehensive documentation, such as proof of income, can improve your chances of approval and secure more favorable loan terms.

Can I Use My 1099 to Get a Loan?

Yes, you can use your 1099 income to qualify for a loan, but you may need to provide additional documents to verify your earnings.

What is the Loan App for Independent Contractors?

There isn't a specific loan app exclusively for independent contractors, but many lenders offer online applications to self-employed workers.

Are There Ways For Independent Contractors To Get Loans Without Credit Checks?

Yes, but it may not be profitable. Lenders take a lot of risks if they don't run a credit check. Therefore, they often charge exorbitant interest rates, fees, and short repayment terms to minimize this risk.

How Can Independent Contractor Loans Affect Your Credit Score?

If the lender does a hard credit inquiry, your credit score is lowered by a few points. Late payments can also lower your credit score. Making your loan payments on time can demonstrate you as a responsible borrower and improve your credit history.

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