Being self-employed, or a professional, such as a lawyer or a dentist, it can be very difficult to obtain funding for your practice. Traditional banks have had a great deal of difficulty lending money to these groups, with average default rates being as high as 10%. As a result, the risk outweighs the benefit. So, the requirements are set to make it more difficult to borrow money if you are in one of those categories. Typical requirements include at least 10 years in service, average yearly revenue over $100,000, and a high personal and business credit score. One solution you can use to get around these requirements is to seek out funding through Small Business Administration (SBA) loans.
How do SBA Loans work? They are funded through private capital markets just like any other loan, but they are partially guaranteed by the Small Business Administration, which is federally funded. What this means is, if a borrower defaults on a loan, the bank will be partially reimbursed by the federal government. These funds are typically leveraged about 10 to 1, so for every 10 dollars that is loaned out, one dollar is guaranteed. This is enough to protect the banks from default, which encourages them to provide funding for companies that would not otherwise qualify.
If you are a self-employed professional who is having difficulty getting approved for a loan, you should consider seeking SBA loans. These are partially guaranteed by the U.S. government. As such, your odds of approval are greater than they would otherwise be.