As an entrepreneur, you know better than anyone that income can fluctuate. One month things are going great, the next month things are a bit quieter. This makes applying for a personal loan different from when you are employed. Lenders must adhere to the stricter AFM rules and therefore look extra critically at entrepreneurs. However, that doesn’t have to be a showstopper at all. Sometimes loans are still possible (albeit after a very extensive financial check), sometimes there are alternative routes to take.
Consequences of stricter rules regarding creditworthiness assessment
Due to the tightened AFM guidelines Lenders are obliged to carefully assess the creditworthiness of applicants and to demonstrate even better that someone can responsibly bear a loan. For entrepreneurs, this often means that you have to show that your company has been running smoothly for a few years, that your profit is stable enough over several years and that your company is financially healthy.
Some lenders choose to keep their underwriting process quick and simple (with less risk). They focus entirely on stable and verifiable income from employment, and no longer provide loans to people who derive their income entirely from their business.
Partly employed or a partner with a fixed income? Then there are possibilities
Important to know: even though as a fully independent entrepreneur you can sometimes no longer apply for a personal loan, there are clear routes through which borrow money is still possible.
Many lenders still offer personal loans if you are part-time self-employed and are partially employed. So, for example, suppose you work as an employee three days a week and also run a business, then your employment income will be included in the assessment. That fixed part provides enough certainty to still qualify for a personal loan, even if you are an entrepreneur.
The same applies if your partner is employed and you apply for a loan together. In that case, your partner’s stable income becomes the starting point for the assessment. Your business income may fluctuate, but because there is a reliable income base, the application can still be approved. That makes a big difference for entrepreneurs who want to invest privately. For example, for a renovation, a car for private use or transferring existing private debts.
The good news: in practice it appears that many entrepreneurs can still take out a personal loan via this route. It just requires a little more puzzling to determine which income components count and how the total financial picture is assessed.
Own responsibility for a loan
Lenders have rules that they must adhere to, but ultimately you have too own responsibility when it comes to whether a personal loan fits your financial future. Not only for this year, but also with a view to possible business growth, fluctuations in turnover, changes in your private life or larger investments that you may want to make later.
A loan can provide peace of mind and create space, for example when you want to finance a renovation without withdrawing your entire buffer. But it remains important to look realistically at your future cash flow. Can you also bear the monthly costs, in addition to other fixed costs such as your mortgage, if a major customer unexpectedly disappears? What happens if you decide to work less or expand?
Smart borrowing starts with good preparation
A personal loan is a financial decision with impact. Although the rules and acceptance processes for entrepreneurs have become stricter, the focus of the current policy is on stability. This means that smart entrepreneurs must carefully investigate what options they have if they want to borrow money. By being transparent about all income flows, you create the opportunity to take out a loan responsibly and smartly under the best conditions.
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