Mini credit for the self-employed – new operators compete with banks
A group of borrowers who are often faced with problems when applying for a loan are entrepreneurs and sole proprietors. The self-employed and freelancers of tomorrow in particular are classified by banks as a risk. They now have it easier than before. However, the selection of small loans for the self-employed and founders is still not extensive today. At least when it comes to a bank’s classic installment loans of USD 5,000 or more. small loans for the self-employed are also rarely available. But they do exist thanks to the various online portals. Comparable financing models from banks such as Nice Bank are also emerging, which was hardly conceivable a few years ago.
Some banks today also approve small loans for the self-employed
Various banks such as Best bank and Cream bank have also joined the ranks of mini credit providers. You and platforms like nice bank sometimes set the lower limits for lending in the lower four-digit range, so that the selection for borrowers is finally increasing. Banks understand that it doesn’t always have to be big loans to make money. The insight could be: A mini-credit for self-employed only has to be granted often enough to generate a generally sizeable turnover. And there are increasing opportunities in the digitalized world to “start a business” even with little money.
Founders often get by with little capital
As a result, many borrowers do not have to rely on large amounts of funding to expand or start a business. The group of those who venture into professional independence with a manageable need for capital is growing accordingly. Interestingly, the requirements for a small loan for the self-employed in the banking industry generally differ quite clearly from the conditions that pure online providers place on customers. This is primarily due to the fact that small loans now tend to cover smaller sums than the typical installment loans mentioned, for which business plans are often even among the documents to be submitted. The independent service providers, on the other hand, approve financing that mostly falls far short of the conditions of normal bank loans.
Of course, this also concerns the two most important points of borrowing:
- the terms
- the loan amounts
A mini-loan for self-employed people, as it is now available on the market from various German and foreign operators, usually ranges from only 50 USD to a maximum of 3,000 USD. However, sums over 1,000 USD are rarely available. The service provider Best bank already has a certain exceptional position here. Very small amounts from USD 100 as well as higher amounts up to USD 3,000 can be requested on the website. The platform is aimed at several customer groups. For example, borrowers who really only need open bills for electricity and gas or a current otherwise due loan installment. Or self-employed people who need new equipment or furnishings for the office.
Repayment often done within weeks
With regard to the small loan terms, there are some offers that deserve the name short term loans. In some cases, microfinance is fully repaid after just two or four weeks. Other platforms work like banks with monthly small loan credit installments, but the complete repayment almost always takes place after 12 months at the latest. Ferratum only has two terms. The full repayment is made either after 30 days or after 62 days. In addition, interested self-employed people can access the website from a quick loan starting at 50 USD. Many people don’t understand that someone gets such small sums of money through a loan.
But the truth is: if the overdraft facility can no longer be exhausted and several customers do not pay their bills in good time, even small amounts of outstanding debt can pose an existential risk for freelancers and the self-employed. At the latest when due to poor payment behavior on the customer side, receivables remain open at the end of the month. General statements that loans only make sense from a height of XY should not be made prematurely.
Do I only have to issue the loan funds commercially?
It is entirely up to you what exactly you pay for or purchase with the small loan for the self-employed. Since the self-employed small loans are normally granted without a purpose limitation, borrowers have a free hand when investing. Of course, borrowers should in principle make sure that providers of the financing do not specify a binding purpose. The waiver of the exact specification for use also allows customers to request a little more money as an “ iron reserve ” if necessary. So you do not have to apply for a loan right away if a small gap needs to be filled again promptly. If you ultimately decide on a small loan from a service provider from abroad, you should compare and ensure particularly carefully so that you can really dispose of the loan freely – on business and privately. The term “private” is another good keyword in connection with a self-employed small loan.
small loan from private for self-employed particularly cheap?
Only you can answer the question of whether the “mini-credit from private” option is suitable for you. In any case, it is true that a mini-loan for the self-employed will be particularly cheap, often even free, with this approach. Because those who can borrow from relatives or friends will in most cases not have to pay anything for the temporary financial help. The situation is different, of course, for lending via brokerage portals such as nice bank, where borrowers also get their money from private donors. Of course, the investors on the platforms want to earn something from lending money. A small loan from your personal environment will most likely also have to be repaid, only that with a little luck you won’t have to pay any interest and thanks to the relationship of trust, agreements on small loan monthly installments can be dispensed with.
Experts also advise on drawing up contracts for personal loans
If a small loan is granted to self-employed persons in double or small three-digit amounts, donors and borrowers do not need a contract. But, beware: Credit professionals warn against not drawing up a contract. The mini-loan agreements should be set out in the contract at the latest for sums of USD 500 and up. Otherwise, the responsible tax office could later use the bank account for obvious transactions, which could have tax consequences for both loan parties. If cash changes hands, this will probably have no consequences. However, it is always advisable to draw up a financing contract if you pay interest on your self-employed loan from your personal environment and both sides want to play it safe.
Tip: You can find further information on the subject of loans for the self-employed on our portal berufekredit.de
Important details about the mini credit for the self-employed
We have already got to know two of the important conditions in the form of the mini-loan terms and the loan amounts. Furthermore, the monthly small loan monthly installments and thus also the loan interest are central criteria in order to be able to compare different loan models at all.
Let’s summarize all the details again here:
- the desired net loan amount
- the loan term
- the monthly loan rate
- the effective annual interest rate
- the committed annual borrowing rate
- the total cost of the small loan
- the payment method and duration
This information provides an objective overview of the costs that you ultimately have to estimate for your small loan for the self-employed. An example: The fixed borrowing rate per year is not very meaningful, which is why banks and financial service providers in Germany are required by law to state the annual effective interest rate. It already includes all costs associated with the financing. Offers are dubious in which applicants are charged for the mini-credit exam. Until a few years ago, processing fees were also common practice on the German market. This is no longer permitted today.
Especially with the so-called “Swiss loans” from abroad, fees for checking the creditworthiness and the non-binding application still threaten. These models owe their name to their frequent origin from the Alpine Republic of Switzerland. It is best to distance yourself from such offers right at the beginning of the small loan comparison. The German market offers enough opportunities to get a small loan for the self-employed. There is no need for a loan that incurs upfront costs.
What role does creditworthiness play in the self-employed small loan?
The creditworthiness – also called creditworthiness – will very likely also play a role in your mini credit for self-employed persons. However, there are different approaches. If there are providers from Germany, they are obliged to contact Credit bureau. The service providers and banks check whether applicants are preloaded. For small loans and short-term loans, however, financing is often granted even if the personal creditworthiness value is not perfect. For example, credit ratings that have been paid too late or past bills have no influence on the rating. Even high credit charges in the registers of credit agencies such as Credit bureau have a negative impact on the rating.
In the case of a small loan, providers often turn a blind eye to satisfactory or sufficient results. With regard to creditworthiness, there is another special feature of mini credit for the self-employed. They are often awarded Credit bureau-neutral. This means that the financing itself has no impact on the creditworthiness and does not end up as an additional entry with Credit bureau and Co. This goodwill can, but does not have to, affect the interest on small loan offers.
What is the interest rate for small loans on the market?
The platforms in this industry often work with fixed interest rates, so that all borrowers are guaranteed the same conditions. Due to the low financing amounts, the funders are generally very likely to advertise. This makes the entire procedure relaxed and uncomplicated for business customers of the portals who may need money very urgently. The instant review helps applicants to see if they may have to look for alternatives from the competition. If loans are granted at interest rates dependent on creditworthiness, the interest rate may vary depending on the result of the query. In some cases, interest rates for small loan models are in the range of normal installment loans. Other platforms calculate interest rates that can be compared to normal overdrafts, for example. Still other products are on the order of a credit card. If the need is great, some customers also pay more than 12 or 13 percent a year. But it is cheaper if there is enough time to search for a loan.
With a small loan calculator, you can determine in a few steps which loan product is suitable for your needs and which small loan costs will accrue until the end of the term. Any incidental costs for the subsequent postal delivery of invoices and similar services should be excluded. They use borrowers little, but in relation to the cost of a loan with a term of a few weeks or months.
How quickly does the small loan land on the account?
“Quick credit decision”, “instant credit” and “Blitzüberweisung” are three popular advertising terms that are used around many small loans for the self-employed. The fact that the Credit bureau exam is carried out digitally means that applications can be quickly evaluated. Some operators also lure customers with an express option, which should allow a transfer to a business account within an hour. Applicants should know that the house bank is also in demand here. In any case, immediate transfers succeed quickly. However, whether the funds actually end up in the account on the same day also depends on the banks involved. It can take a little longer, especially on weekends. Especially since borrowers with mini-loans for self-employed persons above a certain amount still have to provide proof of income. The loan contract must also be signed by the loan provider. This can largely be done online today.
The provider XpressService promises a quick payment within a few hours. A number of competitors speak of similar periods for the transfer after a successful check. Digital processing has another advantage, as we see below. The payment method continues to influence the small loan payment. On request, some platforms pay out loans not only by bank transfer. Payments in cash via partners from the banking world or credit notes via payment services such as PayPal are also gaining in importance. These online services often promise a particularly quick payout.
The identity check before the small loans are paid out
Proof of your own identity is mandatory – with every loan. And thus also with a small loan for the self-employed, freelancers and companies. As before, the small loan can be legitimized using the PostIdent procedure at a branch of the Post Office with a coupon to be printed out by the provider and the ID document. However, borrowers can increasingly go through this step without having to leave home. Identification can be carried out online using the camera of the smartphone or tablet PC or the webcam on the stationary computer. The support of the platforms will be contacted. The employees then guide new customers through the process in which the ID card, a valid passport or another identification document plays a role.
Possible extras for mini financing for the self-employed
Sometimes there are situations in which an existing loan has been repaid for some time but suddenly more money is needed. Before applying for another loan elsewhere, entrepreneurs should contact the current lender’s customer service. Even if increases in the meantime are not to be found in all product descriptions, it is usually practicable for the self-employed to increase the remaining debt to the starting sum for the small loan. If the repayment went smoothly until the application for a top-up, an increase beyond the original loan amounts can often be granted. In case of financial problems, a deferral can also be arranged after consulting customer service. In the case of deferrals and increases, the small loan terms and the monthly installments may change later.
If the operator of the platform has meanwhile corrected loan interest for mini-loan offers, there will often be an interest recalculation in the form of a mixed calculation based on the previous and the new interest rate. If you apply at the right moment, the total loan costs may even decrease.
Our conclusion on small loans for self-employed customers:
There is a mini credit for the self-employed in many places on the Internet. The more precisely the platforms and banks state the conditions, the better you can compare. What is my loan repayment amount for which loan? Where do I have to expect a new Credit bureau entry and where can I get a small loan even with existing entries from credit agencies? These and other questions are answered automatically by the objective comparison of small loans for the self-employed.