(MENAFN- Digital solutions)
Whether you’re a contractor, freelancer, business owner, or gig worker, you may need some help making ends meet from time to time. In many cases, your income depends on your clients or projects, not a stable paycheck. Fortunately, cash advances could help self-employed workers cover unexpected expenses that fall between payments. Here’s how cash advance loans work and whether self-employed borrowers can qualify:
How do cash advances work?
A cash advance is a small short-term loan designed to provide borrowers with necessary funds before their next paychecks arrive. If you need to pay a bill or cover an emergency right away, but your next pay won’t come for another week, a cash advance can fill the gap. To apply, you typically have to show proof of income and answer some questions about your finances in person or online. The evaluation process moves quickly, so you often receive your loan shortly after approval. Cash advance loans have short terms, so you typically have to repay the loan within two to four weeks or the next time you get paid.
How can self-employed borrowers qualify?
Lenders usually determine whether an applicant qualifies for a cash advance based on their income, credit score, and payment history. Self-employed workers with fluctuating incomes may find it a little more challenging to qualify, but not to worry. Lenders often understand that many different types of work lead to variable income. If you can demonstrate that your revenue has gradually improved, lenders often have more faith in your ability to pay. Good credit and payment history could also help show lenders you’re a dependable borrower and improve your chances.
How can you prove your income?
When you apply for your cash advance loan, you’ll have to show lenders proof of income. Full-time workers typically provide pay stubs, but self-employed workers may have to provide different documents. Some potential options include:
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Bank statements that show a regular history of deposits
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Tax documents, including tax return forms and 1099s
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A ledger document that shows your overall budget, including profits and expenses
Different lenders may prefer various forms of documentation, so you may want to prepare several documents and ask your lender their preferences.
What if you don’t qualify for a cash advance?
If you’re relatively new to self-employment, you may not have adequate proof of income for a cash advance. In some cases, a trusted friend, family member, or colleague with a strong credit history and consistent paychecks may improve your chances. Certain lenders allow you to apply for a loan with a cosigner, who could provide extra financial reassurance by agreeing to repay the loan if you can’t.
Some lenders also offer secured loans, which allow you to borrow a specific amount of money if you can provide collateral, like a vehicle. If you’re not able to repay your secured loan, you may lose the property you put forward as collateral, so this could be a risky option.
The bottom line
Sometimes freelancers or contractors may go several weeks before receiving their next payment from a client, but bills can’t always wait. As long as you can prove you have the income to repay your cash advance loan at the end of your term, the extra funds could keep you from falling behind so you can focus on your clients and building your business.
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