Applying for a personal loan can be difficult when you’re self-employed. Self-employment is when a person does not work for a specific employer who pays them a consistent salary or wage. Self-employed individuals earn their income by contracting with a trade or business directly.

Lenders typically require documents like paystubs and recent W2s to verify your income, which you may not have if you work for yourself. However, self-employed individuals are not completely out of luck, as some lenders will consider bank statements and tax returns instead. You can also explore small business loans if the funds are used to cover business-related expenses.

Self-employment statistics

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  • On average, the percentage of self-employment has risen by 0.97% since July 2022.
  • Self-employment in the U.S. reached a record high of 10.3 million people in July 2021, rebounding after the COVID-19 pandemic.
  • Self-employed individuals are 75% more likely to work at private companies than public companies.
  • Independent contractors make $28 an hour on average.

Self-employment demographic and industry statistics

Self-employment rates vary based on demographic information. Here is a breakdown of the top states for self-employment, self-employment by industry and self-employment by age.

State Employment rate
Montana 16.10%
Maine 15.40%
Vermont 14.40%
South Dakota 14.20%
Oregon 13.40%

The top states for self-employment are Montana, Maine, Vermont, South Dakota and Oregon. Montana has the highest number of self-employed individuals in the U.S., with Maine following close behind.

The top industries for self employed people in the U.S. are retail, manufacturing and finance. Construction and healthcare are also big industries for the self-employed.

Age range % Self-employed
16 to 24 years 2.2%
25 to 34 years 5.7%
35 to 44 years 10.10%
45 to 54 years 11.8%
55 to 64 years 14.7%
65 years and older 24.10%

Older Americans are more likely to be self-employed on average than younger Americans. 24.10 percent of Americans over the age of 65 are self-employed. Meanwhile, only 2.2 percent of Americans between the ages of 16 and 24 are self-employed.

Self-employment financial statistics

Here is a breakdown of how long self-employed individuals tend to stay at a job, as well as the average income of self-employed individuals by industry.

The amount of time self-employed individuals stay at one job varies significantly. Twenty-one percent of self-employed individuals stay at a job for only one to two years, while 25 percent stay at one job for more than 11 years.

Self-employment industry Average annual income
Engineering $102,462
IT $81,809
Marketing $72,420
Art/Design $65,594
Sales $62,160

The above industries are the highest paying industries for self-employed individuals. Engineering is the highest-paying industry for those who want to work for themselves.

How to prove income when self-employed

Before you apply for a personal loan, you should know what types of income documentation the lender may consider.

One of the first and most important steps in applying for personal loans is to produce documentation to verify stable, consistent income. This is a straightforward process for someone who works for an employer, as they would usually need to provide copies of recent pay stubs. Some lenders can even verify income electronically through an employer’s payroll system.

However, would-be borrowers who aren’t on an employer’s payroll will need to produce other documentation to prove their income According to Mary Monroy, a credit counselor with ClearPoint Credit Counseling Solutions, “The lender will likely require the most recent two years’ tax returns, a profit and loss statement and bank account statements to verify the income is seasoned. If it isn’t, then sometimes copies of deposited checks are required.”

Chris Dervan, senior vice president and product manager at PNC Bank, said that income verification is a standard requirement for all loan applications, regardless of income sources. “We require income information and documentation for all applicants, so in that respect, there’s no difference for self-employed borrowers. The variation would be in the type of documentation involved with those who don’t have a pay stub,” Dervan said.

Business loans and health insurance

If you’re having trouble qualifying for a personal loan due to your self-employed status, you should consider applying for a small business loan.

Business loans

A business loan is a loan specifically intended to cover business expenses. You can typically get approved for higher loan amounts than you can with a personal loan. However, you must use the funds for business purposes and the application is lengthier. Plus, the lender could request business financial statements, proof of income, profit and loss statements, projected financial statements, tax returns and any loan application history, if applicable.

Like a personal loan, you’ll also need good or excellent credit to qualify for funding. If your credit score is low, you may still be approved, but with less favorable loan terms. And if your business hasn’t been established for an extended period, you’ll generally have to provide a personal guarantee for the loan. You’ll be liable for the outstanding balance if your company falls behind on payments.

Health insurance

If you need funds to cover health-related expenses that you cannot cover with a business loan, it could be worth looking into self-employed health insurance.

If you are self-employed, you can treat your health insurance as a business expense. This allows you to deduct premiums from your adjusted gross income on your taxes, thus reducing your tax bill and increasing your refund.

Health insurance can be accessed through federal and private programs, although federal plans are generally safer and more affordable. When searching for healthcare providers, you should look for an affordable plan with decent coverage and low premiums and deductibles.

Frequently asked questions