1.5 million Canadians, or nine per cent of the total workforce, registered as self-employed in the 2014 census. That’s not a trivial portion of the population! These individuals face many challenges including tax preparation, keeping themselves going with a continuous stream of clients and work, and especially planning and saving for major financial goals.

Many self-employed individuals may seek out personal loans to help expand their business or help cover financial obligations, only to be told that they are not eligible for financial support from a major lender. Getting a loan as a contractor or self-employed worker is not impossible – it is, however, a process that requires plenty of due diligence and preparation.

Keep Your History On Hand

Lenders, no matter the type, will look for some proof of your financial history when assessing how to credit you with a loan. As a self-starter, you must be vigilant about keeping records of all the work you do, your earnings, hours, and tax returns. The more documentation of financial history you can provide, the better off you will be. Alternative finance firms (like Progressa) are rapidly making the underwriting process more efficient and adaptive so as to be able to evaluate more applicants with a wider range of documentation and eligibility factors, but a strong history is the bedrock of your application.

Make a Statement

When getting a mortgage or other loan, there is an option to declare what’s known as stated income. In this case, a lender will allow you to simply tell them how much you make instead of proving your income with two years’ worth of tax returns.

However, this may only apply if you were in the same profession for the two years prior to you becoming self-employed. Lenders will then typically estimate the average income within that profession to determine your income. Stated income, however, is a more complex way to prove your income, and not every lender is willing to accept this as proof.

If you are borrowing for a mortgage, The Canadian Mortgage and Housing Corporation offers different rates for self-employed individuals who can prove their income, and numerous private lenders offer coverage and rates for those who borrow using the stated income method.

Keep Your Credit Clean

Managing your credit score is even more important for financial planning than usual when you are your own boss. Taking measures to repair and optimize your use of credit – a topic we’ve covered in a range of other blogs on this page – will get you incredibly far when it comes to seeking out loans and other financial services.

With this advice in mind, remember that being self-employed may be a challenge, but it’s one you’re free to conquer on the terms that make the most sense for you. Don’t be discouraged, and work with an advisor if necessary to make sure you’re getting the most out of your hard work. With the proper preparation, freedom to access the financial resources you may need will no longer depend on the “nine to five.”

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