If you’re a sole proprietor, you’re essentially running the show on your own. It’s the simplest type of business structure — no partners, no LLC, no shareholders — just you calling the shots.
Lenders can be cautious about working with sole proprietors since there’s less separation between personal and business finances, but you have options and there are ways to increase your odds of getting a business loan. And if traditional loans don’t work for you, there are other methods to fund your business, like grants, crowdfunding or even personal loans.
You can get a business loan as a sole proprietor, but it might take more effort to prove you’re a good candidate for financing. Since sole proprietors don’t have the same legal or financial separation between personal and business assets as LLCs or corporations, lenders may see them as riskier borrowers. But that doesn’t mean it’s impossible — the key is being prepared.
When you’re a sole proprietor, the right type of loan comes down to what your business needs most. Are you looking to make a big purchase, like equipment? Do you need extra cash to cover day-to-day expenses? Or are you just getting started and need some seed money?
Here’s a snapshot of your five top loan options. Each has strengths and weaknesses, so it’s all about finding the one that fits your goals.
| Loan Type | Typical Loan Amounts | Interest Rates | Repayment Terms | Best For | Pros | Cons |
| Term loans | $500 to $5,000,000 | 6%–25% | 1 to 10 years | Larger, one-time expenses like equipment purchases or business expansion |
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| Business lines of credit | $500 to $10,000,000 | 8%–60% (variable) | Revolving, typically renewed annually | Managing cash flow or covering unexpected expenses |
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| Microloans | Up to $50,000 | 8%–13% | Up to 7 years | Small startups or sole proprietors with modest capital needs |
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| Equipment financing | 100% of equipment cost | 4%–45% | Matches equipment’s lifespan | Purchasing or upgrading equipment specific to your business |
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| Invoice financing | 70%–90% of invoice value | 1%–5% per month | Paid when invoices are settled | Businesses with unpaid invoices needing immediate cash |
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Sole proprietors can use personal loans to fund their businesses, and in some cases, it might be the better option. Personal loans are often easier to qualify for than business loans, especially if your business is new or you don’t have a strong credit history tied to it.
Since personal loans are based on your individual creditworthiness, they can provide a quicker path to funding without requiring extensive business documentation.
Qualifying for a business loan as a sole proprietor takes a little preparation, but it’s within reach if you take the right steps. The process comes down to three key areas: understanding your finances, meeting lender requirements and organizing your documents.
Let’s break it down:
Knowing where you stand financially helps you make better decisions about how much to borrow, whether you can comfortably repay a loan and what kind of loan will work best for you.
Here’s what to focus on:
When you’re applying for a business loan as a sole proprietor, lenders want to feel confident that you can handle the responsibility of repayment. While every lender is different, most consider the same general factors to decide if you qualify.
Here’s what you’ll need to think about:
Having your financial documents ready can streamline the loan application process and improve your chances of approval.
Here’s a breakdown of the key documents you’ll need and why they matter:
If you’re starting a new business or can’t provide documentation, you’ll find it much harder to get a loan from a bank. You may need to opt for a personal loan or a secured business loan that requires collateral instead. You could also consider an online lender. These lenders often have less stringent requirements for business loans than banks do.
For new sole proprietors who are just starting a business, the lack of a business track record can make traditional lenders hesitant. They like to see things like years of financial history, tax returns and proven revenue, which new businesses often don’t have. This requirement can feel like a catch-22: You need funding to grow your business, but you don’t have the history to secure it.
The good news? Online lenders and microloan programs are often more flexible, focusing on your personal credit or future potential rather than strict financial documentation.
You can also strengthen your application by offering collateral, like equipment or assets, to reduce the lender’s risk. And while it might take extra effort, creating a business plan and raising your credit score can also improve your chances of being approved as a new sole proprietor.
If you’ve been running your business for a while, you already have a track record to show lenders — but that doesn’t mean approval is automatic. These tips will help you present a strong application and improve your chances of securing the loan you need:
Funding isn’t limited to loans. As a sole proprietor, you may not be able to sell stock like a corporation, but there are other ways to raise capital. Non-loan options can be especially appealing if you want to avoid debt or don’t meet the qualifications for traditional financing.
Angel investors are individuals who invest their own money into businesses they believe in, often in exchange for equity. They’re particularly common for startups or businesses with strong growth potential. For sole proprietors, this means giving up partial ownership in exchange for funding, but it also often comes with valuable guidance and industry connections.
Business grants are essentially free money — funding you don’t have to pay back — but they usually come with strict eligibility requirements and a competitive application process. Federal, state and local governments, as well as private organizations, offer grants for various purposes, such as supporting small businesses, promoting innovation or fostering economic development.
If you have a compelling idea and the ability to market it, crowdfunding can help you raise funds directly from your supporters or community. Platforms like Kickstarter, GoFundMe and Indiegogo allow you to pitch your idea online and invite people to contribute money, often in exchange for perks or early access to your product.
Getting financing as a sole proprietor might feel like a challenge, but it’s absolutely doable with the right approach. It all comes down to preparation. By planning ahead and staying organized, you can find the funding that works for you and set your business up for success. Remember, there’s no one-size-fits-all solution — take the time to find what fits your goals best.
Since sole proprietors have little separation between business and personal finances, banks and financial institutions often view them as risky. If a sole proprietor loses a key contract, gets sick or cannot continue business, the loan will likely go unpaid.
The easiest business loan for a sole proprietor to get is usually from an online lender or a microloan program. These lenders tend to focus on your personal credit and cash flow instead of needing years of business history or perfect financial records.
Having bad credit can make it harder to get a loan. This factor is especially true if you’re a sole proprietor who’s trying to start a new business. You may need to consider the following options:
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Top 6 alternatives and competitors to Tally.
Tally is a debt management app offering a revolving line of credit to consolidate credit card debt.
LendingClub is a peer-to-peer lending offering personal loans of up to $40,000 with fixed monthly payments. Find other lenders like LendingClub.
Prosper is a peer-to-peer lender offering loans of up to $35,000 at competitive rates with simple terms. Learn about similar online lenders.
OneMain Financial is an established lender that offers fixed-rate loans to fund just about any legitimate purpose. Learn about similar lenders.