Loan for self-employed individuals - 2026 guide

Why a loan for self-employed individuals is problematic

Main reason: Self-employed individuals do not have a fixed monthly income like employees. Banks cannot be certain that money will arrive in your account every month. Therefore, self-employed applicants are required to demonstrate a longer trading history, provide more documentation, and accept higher interest rates. In practice, this means:

• Banks require a minimum of 1-2 years in business (an employee needs only 3 months).
• Sole traders usually pay interest rates that are 1-3% higher.
• Approval takes longer (3-7 days versus 24 hours for an employee).
• Higher documentation requirements (tax returns, statements, bank statements)

Special situation: new self-employed person (less than 1 year)

If you have been self-employed for less than one year, the conditions are even worse. Traditional banks will struggle to approve a standard loan. Alternatives:

• Microloans: ČMB (Czech Microfinance Bank), CEB (Foundation for the Support of Business): up to 200,000 Kč, without a creditworthiness analysis.
• Non-banking services: Zonky, Home Credit, Credito: faster approval, worse terms
• Factoring: Sale of future invoices with a discount: without a DLH score
• Overdraft: Short-term rollover: using the reserve on a current account

Types of loans: which one to choose

Business loan: Explicitly intended for business purposes (purchase of equipment, vehicles, inventory). Advantages: lower interest rates (5-7 %), no VAT on interest, tax-deductible interest. Disadvantages: more complex approval process, documentation requirements. Typical amount: 100-500 thousand Kč.

Consumer credit: Intended for personal use (living expenses, not business). Advantages: faster approval. Disadvantages: higher interest rates (7-10 %), interest cannot be deducted from taxes (VAT 21 %), not optimal for self-employed individuals.

Overdraft: Short-term (usually 30-90 days) revolving loan on a current account. Advantages: very flexible, no long deadlines. Disadvantages: higher interest rates (8-12%), suitable only for operational issues.

Leasing: Rental of equipment with the option to purchase at the end. Advantages: no impact on credit score, tax-deductible instalments. Disadvantages: ownership only at the end, more expensive overall. Suitable for vehicles and equipment.

Factoring: Sale of future invoices. Advantages: no lengthy approval process, no credit score check required. Disadvantages: very expensive (4-15% of the invoice amount), disadvantageous in the long term.

How banks calculate the loan amount

Banks have two methods: flat fee a actual income. The lump sum is the fixed profit for a given business category (e.g., IT consultant 800 thousand Kč, service provider 600 thousand). Actual income is calculated based on your tax return and statements.

Example: you are an IT consultant with a net profit of 1.2 million Kč. The bank will take 80% of the flat-rate amount (640 thousand) or 80% of the actual profit (960 thousand). It chooses the less favourable option (the flat rate). This means the loan is approved for a maximum monthly instalment of approximately 2,000 Kč over a five-year term, i.e. Around 120 thousand Kč. If your income is lower than the flat-rate amount, the bank will use the actual figure.

The role of the DLH score (creditworthiness)

DLH (Central Register of Debtors) is a public database tracking all defaults (overdue payments, unpaid fines). A clean DLH record gives you an advantage, lower interest rates (5-6 %). If your DLH shows any entry (even a small debt from 5 years ago), rates jump to 7-10 %, and some banks may refuse to lend to you altogether.

A negative entry in the Credit Register (DLH) is gradually removed: the original record is deleted 5 years after payment, but during those 5 years you will face difficulties. The best strategy: check your DLH status in advance, and if you have a small debt, pay it off before applying for a loan.

Tax deductibility of interest

If you take out business loaninterest is tax-deductible. It reduces your tax base. Example: a business loan of 300,000 at 6% interest = 18,000 in annual interest. This will reduce your tax (at a 15% rate) by 2,700 Kč per year.

The opposite is consumer loan - interest is NOT tax-deductible, making it generally a poor choice for self-employed individuals (OSVČ). Additionally, non-banking services attract 21% VAT on these amounts.

Mandatory documents for a loan for self-employed individuals (OSVČ)

Once you arrive at the bank with your application, prepare the following:

• Tax return for the last 2 years (most important)
• Extract from the Commercial Register (ARES/REJSTŘÍK RVOS): proof of registration
• Personal identification document (passport or ID): identification
• Accounting statements (balance sheet, income statement): if you keep accounting records
• Bank statements for the last 3 months: proof of income
• Statement of Honour on income (if no accounting is kept). You may provide this yourself

DLH verification: how to check it yourself

Before submitting your application, verify your creditworthiness on uver-pro-osvc.cz www.datalert.cz or www.creditinfo.cz. The service is free once a year. If you have anything in your DLH:

• Find out what is involved (the debt owed to which entity and the amount).
• If this is an error, contact the creditors and request a correction.
• If this is a genuine debt, consider repaying it before applying for a loan.

When is factoring a suitable choice?

Factoring (selling invoices) is suitable only in these situations:

• You have a long-term client who pays with a delay (30-90 days).
• Do you need funds for operating expenses (stock purchases, wages)?
• You have a negative credit history and cannot get a bank loan.
• Do you want to prepare your cash flow for 1-2 months?

Example: you have an invoice for 100,000 Kč with a payment term of 60 days. The factor takes 5% (5,000) and pays you 95,000 Kč immediately. Cost: 5,000 for 2 months = effectively 30% per year. Very expensive!

Leasing versus loan: when you want a car or equipment

Leasing: You rent the equipment for 3-5 years, after which you purchase it at an agreed price. Advantages: no DLH score required; instalments are tax-deductible. Disadvantages: overall more expensive (15-25 % compared to purchase); maintenance costs may be borne by the leasing company or by you (depending on the contract).

Loan + purchase: You take out a business loan and purchase the vehicle or equipment. Advantages: you own it immediately, interest is tax-deductible, and it is cheaper in the long term. Disadvantages: you need a DLH score, the process is more complex, and you bear the risk of depreciation.

Recommendation: If your credit history is clear and you have several months to spare, take out a loan and buy directly. If you have issues with your credit history or need the equipment immediately, consider leasing.