Loans you can get if you’re self-employed

How can I borrow money if I’m self-employed?

Getting self-employed loans isn’t as hard as it used to be. A number of lenders offer personal loans for self-employed people in Canada. These range from several hundred dollars up to $50,000 or more.

You’ll need to meet eligibility requirements, which include proving that you have a steady income and can afford repayments. If you’re having trouble getting approved, apply with a cosigner who’s in a financially better position or provide collateral (such as home equity or vehicle ownership) to secure your loan.

Types of loans for self-employed people

Self-employed loan requirements

• Be at least the age of majority in your province or territory (18 or 19)
• Be a resident of Canada with a valid Canadian address
• Have proof of income (such as recent bank statements or tax Notices of Assessment)
• Have a bank account
• Meet any income and credit score requirements

Documents needed to apply for self-employed loans

Lenders that offer loans for self-employed people in Canada usually require the following information:

• Tax returns. Be prepared to show the last two years of your personal tax returns (and business returns, if separate). These will help prove the income you declared on your application.
• Recent bank statements. This includes statements showing your savings and business transactions over the last 90 days or longer. It may also include statements showing any other outstanding loans or credit cards from other lenders.
• Company information. If you own a business, be prepared to provide information like your company’s name, address, etc.
• Personal identification. This could be your driver’s license, passport or other form of valid government-issued photo ID. Upload a copy of your ID when applying online or email it to your lender.

What does it mean to be self-employed in Canada?

According to the Canada Revenue Agency (CRA), a self-employed person “must operate a business and be engaged in a business relationship with the payer.” If you can determine where, when and how you work, you’re likely to be considered self-employed by the government. This includes freelancers, contractors and consultants.

According to Statistics Canada, 13.2% of people employed in Canada were self-employed in 2023, or over 2.65 million people. Most (71.9%) operate small businesses with no employees. Autonomy is cited as the biggest reason people choose to be self-employed (38.2%) followed by the ability to pursue passions (14.3%).

Can I get self-employed loans with bad credit?

Yes, there are loans for self-employed people with bad credit. But you might have to look beyond your local bank to alternative lenders. These have less strict criteria to attract customers—including bad credit borrowers—who have a hard time getting funding from banks.

Some online lenders consider applicants with credit scores as low as 300. Perhaps the easiest way to find self-employed loans for bad credit is to use a loan broker like Loans Canada or LoanConnect. Once you fill out a single application, you’ll be matched with suitable lending partners from among the broker’s network. It’s typically free, and you’re under no obligation to move forward with a loan.

How much do personal loans for self-employed people cost?

The cost of personal loans for the self-employed depends on factors like your loan term and interest rate (which can range between 6.99% and 46.96%). To illustrate, here’s how much a $5,000 loan could cost over a 3-year and 5-year term with 8%, 16% and 24% interest.

Term	Interest rate	Monthly payment	Total cost
3 years	8%	$156.68	$5,640.55
5 years	8%	$101.38	$6,082.92
3 years	16%	$175.79	$6,328.27
5 years	16%	$121.59	$7,295.42
3 years	24%	$196.16	$7,061.91
5 years	24%	$143.84	$8,630.39

Personal loan calculator for self-employed loans

• How to use this calculator

  1. Enter how much you plan to borrow under Loan amount.
  2. Write the loan term in years (not months) under Loan terms.
  3. Enter the loan’s interest rate if there are no fees under Interest rate. Otherwise, write the annual percentage rate (APR), which includes interest and fees.
  4. Hit Calculate.
  5. Review your results.

How do I compare my options for self-employed loans?

To find the best loan for you, consider the following factors when comparing self-employed loans in Canada:

• Interest rate. Make sure you know the difference between a fixed and variable interest rate. If you’re going with a variable interest rate, check that you will be able to make monthly repayments if the rate happens to increase.
• Loan amount. The amount you qualify for depends on the lender you choose, your requested loan amount, your credit score and income and other requirements.
• Turnaround time. Depending on why you’re applying for a loan, you may need your funds disbursed as quickly as possible. Some lenders can release funds within one business day, while others may take several days.
• Eligibility. Lenders usually have minimum income and credit score requirements as well as existing debt limits you can’t exceed. To get a loan for self-employed people in Canada, you must reside in the country and have a Canadian bank account.
• Application process. When comparing different lenders, be aware of the application process specific to each lender (i.e. online or in person) and the challenges you may face when applying (such as where to submit documents electronically and what types of ID are acceptable).
• Loan cost. Make sure you’re aware of all fees associated with each loan. This includes any one-time or ongoing fees. Consider fees for loan origination (to set up the loan), early repayment and late or bounced payments.
• Collateral required. Is the loan you’re considering secured or unsecured? In other words, do you have to put up any collateral to secure the loan?

Compare loans for the self-employed

What are the biggest challenges to getting a loan when you’re self-employed?

Getting loans for self-employed people in Canada is a lot easier than it used to be, thanks to the rise of alternative lenders that work with a broader range of applicants that banks. But that doesn’t mean there aren’t any challenges. Here are some obstacles you could face when applying for a self-employed loan:

Proving you have enough income

One of the toughest parts of getting a loan is proving that you can afford to repay it. If you can’t provide pay stubs like traditional employees, lenders will often ask you for a recent tax Notice of Assessment (NOA) or bank statements to see your base monthly and annual income. Some lenders may accept other forms of income like government benefits or investment earnings.

Proving your income is steady

As a self-employed individual, your income stream may not be consistent. Clients come and go, and your professional landscape may change frequently. But lenders want to know that you can afford repayments today and in the future. As mentioned, documents that help prove this include Notices of Assessment from several recent tax years, bank statements from the past six months or longer and letters from long-term clients attesting to your ongoing work arrangements.

Your finances aren’t strong enough

If you can hold off getting a loan right now, you can boost your credit score and more easily qualify for a loan by increasing your income, fixing any errors on your credit report and reducing your costs to free up income for debt repayment.

Having a cosigner on your loan can also help alleviate a lender’s hesitation. You and the second party would be equally responsible for loan repayment. Make sure you avoid getting stuck in a cycle of debt by borrowing more than you need.

FAQs about loans for self-employed people

• Can I get a loan as a sole proprietor?

  Yes, you can apply for a personal loan as a sole proprietor in Canada, and you might also qualify for some business loans.

• Can I get a personal loan if I work part-time?

  Yes, although, like self-employed borrowers, your options might be limited and you'll have to submit documents proving that you regularly bring in enough money to afford repayments. Check out our guide to loans for part-time employees to learn more about your options.

• Can I get a personal loan for self-employed with no proof of income?

  You might be able to get a personal loan while self-employed without providing proof of empoyment as long as you have money coming in from somewhere. Remember, income doesn't necessarily have to come from a job. Some lenders accept government benefits, pensions and any other forms of recurring deposits as income. If you have a job offer, you might also qualify for a loan based on your future salary.

• Can I get self-employed loans that are unsecured?

  Yes, it's possible to get unsecured personal loans if you're self-employed, although these tend to come with higher interest rates. If you're looking for an unsecured self-employed loan, consider using a loan broker like Loans Canada or LoanConnect to help narrow down your options.