5 Best Financing Options for Freelancers

5 Best Financing and Loan Options for FreelancersAdopting the ‘gig life’ is now a booming trend, especially among millennials.

Who wouldn’t? You’ll be able to work at your favorite coffee shop, sip a delicious cappuccino while crunching workloads on your laptop. It’s the perfect personification of work-life balance.

You are your own boss. Your earning potential is unlimited. You’ll be avoiding the dreaded morning commute.

And best of all, you’ll make your own hours. A recent study even showed that freelancers spend 1 billion hours per week doing remote works.

But no matter how lucrative the gig economy may appear, many freelancers are still burdened with money concerns as the income in freelancing is generally shaky.

If such is the case, what happens when a freelancer like you needs funds and looks for financial assistance from a bank?

The answer is, you might find it difficult to stay afloat without a regular paycheck. Bank lenders are reasonably prudent when it comes to loaning money to unsalaried workers.

Here’s What You Need to Know First

Most banks may be unwilling to enter a loan agreement as they see freelancers as high-risk. A freelancer is already a sole proprietor and is liable for all debts and losses that he or she may incur, including his or her business.

The bank is left holding the bag if the freelancer fails to make ends meet because he or she is terrible at running a business or cannot work due to sickness and other reasons.

 Fortunately, there are online lenders now that offer interesting alternatives to people who need financial assistance like freelancers. These non-traditional lenders have a swifter approval process and more relaxed criteria for loan approval. Also, they assess your personal assets, income, and credit score and not your business.

The only snag with this option is that these lenders impose higher interest rates, a natural trade-off cushion for convenience and lenient eligibility barriers they will give to you. 

If you still want to pursue financial assistance, here are the different financing and loan options available for you.

Personal Loans

Business loans are almost always outside the reach of freelancers, whether its from credit unions, banks, and non-traditional online lenders. Normally, only well-established businesses with good credit, low debt, and healthy profit histories are qualified for business loans. 

Good thing personal loans are easier to acquire. Lenders like Credit Ninja and other credit platforms will focus on your income sources, your debt-to-income ratio, and your credit score. They wouldn’t mind about the status of your business and such.

The only limitation here is that you won’t be able to borrow as much money because personal loans tend to max out at $35,000 to $50,000 compared to business loans.


Microloans are good solutions for freelancers with funding problems. This type of loan typically range from $5,000 to $10,000 and is almost always less than $35,000. The best thing about microloans is that they have lower interest rates compared to the traditional ones.

It works well for freelancers as they can capitalize on the rates and terms offered by microlenders. Moreover, these loans squarely target marginalized groups like veterans, women, and minorities who might have a hard time getting approved by a traditional source.

Invoice Financing and Factoring

Those who run B2B businesses and must maintain a steady cash flow to function will greatly benefit from invoice factoring. The process is quite simple. You will sell your unpaid invoices to factoring companies at a discounted rate then you’ll get paid upfront. An invoice factoring can be a godsend too if you suffer from late-paying customers.

Invoice financing, on the other hand, works by using your invoices act as collateral. Fees, terms, and rates vary from lender to lender, but both invoice financing and factoring can be excellent alternatives to traditional business loans for freelancers, particularly those who run on a B2B platform.


You probably hear about crowdfunding websites like GoFundMe, Indiegogo, and Kickstarter, unless you’ve been in a coma for the past five years or so. Kidding aside, crowdfunding is a good way for freelancers and new business owners to source funds, especially for those who are in the creative jungle.

How does it work?

 Through rewards crowdfunding, potential sponsors and backers will fund your project in exchange for free access to your works, products, or services. What makes this platform a standout is that you don’t have to repay the funding.

 You don’t have to repay anything. However, it will require a lot of time, effort, and thoughts on your part. It’s applicable for both following up with donors afterward and crafting strategic campaigns.

 Crowdfunding is not for you if you don’t have the inclination or time to make your campaign a full-time job.

Lines of Credit

Unbeknownst to many, it’s not just banks that offer lines of credit. Many online lenders offer it too.

In case you’re not familiar with the term and how it works, the principle is pretty simple and can be likened to a credit card. You’ll be given access to a significant amount of money that you can withdraw and use (up to the maximum limit) whenever you want. You’ll only pay the interest of the money you spent. 

Sounds exactly just like a credit card! The only difference is that lines of credit often have more reasonable fees, rates, and repayment terms.


As a freelancer, you don’t always have it easy as there are barriers you need to overcome without worrying about financial stability. Luckily, there exist reliable funding options you can resort to.

Whether you ultimately go with a personal loan, a microloan, invoice financing, crowdfunding, or lines of credit, be sure to be diligent with your dues. Thus, it’s a good idea to make sure you have a solid business plan with a payoff schedule that’s shorter than the original life of the loan and within your reach.

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