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Loans: How do I Prove my Income if I am Self-employed?
Loans: How do I Prove my Income if I am Self-employed?
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Loans: How do I Prove my Income if I am Self-employed?

Sheila Brenda Andoi
October 31, 2022
A self-employed businessman PHOTO|AFRICA RESEARCH INSTITUTE
A self-employed businessman PHOTO|AFRICA RESEARCH INSTITUTE

You’ve worked hard, pursued your passion, and established a business or a freelance career. It’s not easy, so, good job! Being your own boss has numerous advantages, including the possibility of achieving the ideal work-life balance. 

On the other hand, anyone applying for a personal loan or financing for a home or car must provide proof of income. For those who are employed, obtaining copies of payslips or having your employer sign a letter of proof of income isn't difficult. 

Unfortunately, proving your income may be more difficult if you work for yourself.

In this article, we'll go over what proof of income is and how to provide proof of income if you're self-employed.

Read Also: 5 Things the Bank Will Ask When You Need a Business Loan

What is Proof of Income?

This is the requirement by a financial institution of a borrower to provide evidence of their income level for the purposes of loan qualification. 

It could also be used to qualify you for other specialised products such as credit cards or business-focused offerings such as business accounts, priority banking and overdrafts. 

An institution may typically require you to fill a ‘Proof of income document’ that details your total earnings over a specific time period. 

The specific type of income documentation required is usually determined by the individual institution making the request. While all of the documents that will be listed below constitute some form of income proof, some of them are regarded as more credible than others, while some institutions may disregard some and emphasise on others.  

Banks, for example, prefer tax returns and payslips over other forms of income documentation. You will typically find a more flexible or broader ‘proof of income’ definition with microfinance institutions as compared to commercial banks. 

Read Also: What to Do When You Don’t Make Enough Money

Why Do You Need Proof of Income?

As we have said above, if you are not receiving a monthly paycheck from an employer or have a very formal business that has all its books in order, it may be hard for a lender to determine how much you can afford to borrow. 

You specifically need to prove that you have an income, a regular one for that matter and that you are earning this income through legal means as well as you are making enough to cross the minimum threshold a lender requires one to have to qualify for a specific amount. 

Read Also: Where Can I Get Instant Loans in Kenya?

If your income sources are verifiable, a lender can then confidently make a decision on your loan application. You want the lender to be not only convinced of your income earning potential, but also of your ability to repay, that your income can support the amount you want to borrow and that you are low risk enough to qualify for a low interest rate. 

This means, however you make money, you need to have very good and traceable records that can speak for you. 

Other reasons for the importance of self-employment income documentation include:

What Counts as Proof of Income for Self-employed People?

Many self-employed individuals face the challenge of being unable to produce a standard income proof. 

This could either be due to inconsistencies in income as is the reality in the worlds of entrepreneurship and freelancing, or incompleteness in documentation when income is from multiple small sources. 

Fortunately, you can still demonstrate your ability to pay if you are consistently generating revenue, even if the amount is not the same each month.

Read Also: 7 Ideas to Diversify Your Sources of Income

Here are some examples of documents that you can use as self-employment income documentation;

Annual tax returns

An income tax return is irrefutable proof of your earnings for the tax year. The legal record details your annual income and is filed with the Kenya Revenue Authority (KRA).

Bank statements

On your bank statements, you should be able to see all of your customer or sales payments. To avoid having to explain your personal finances in great detail to lenders, consider opening a business bank account for your income. As a result, the transactions that a lender should review will become more streamlined.

Before submitting personal bank statements as proof of income, go through and specifically identify your incoming payments and business expenses.

Read Also: Kenyans Are Ditching the Big Banks - Money Weekly 

Profit and loss statements

This statement tracks your earnings, costs, and outlays for doing business over a specific time period, such as a fiscal year. These statements are more commonly produced by people who operate their businesses, but that doesn't mean freelancers can't keep them as well. You can look into software that will help you create the document yourself.

M-Pesa Statements 

If you are running a small business and receive payments through a merchant till, a financial institution will accept a record of your mobile money activity as proof of income. This includes your savings records with mobile facilities such as M-Shwari. 

Separating your personal expenses on mobile money with business transactions may quickly provide a quick snapshot of how much cash flow you have monthly.

Read Also: 10 Profitable Businesses to Start With Ksh50K in Kenya

Online Cart Activity

Do you operate an online shop such as on Shopify or Amazon and the platform provides a verifiable history of transactions on your account? How about your taxi-hailing app history of ride requests and weekly payouts?

Some financial institutions will accept this history as proof of income. For example, institutions providing credit specifically aimed at financing the purchase of taxi vehicles will accept your weekly earnings from the online taxi business as proof of income to determine your loan eligibility. 

>>>> Compare Business Loans From Trusted Lenders in Kenya

How to Show Proof of Income if You Get Paid in Cash 

Even if you are paid in cash, you can still provide proof of income. You have several options, listed below:

Create your own invoices. If your client does not provide you with paycheck stubs, you can still create your own. Create an invoice for each payment you receive, detailing who paid you, when they paid you, how much they paid, and the type of work you performed.

Make use of accounting software. Most bookkeeping software allows you to track cash payments. The software should record all of the information you need to prove your source of income.

Read Also: 6 Money-Making Online Businesses for 2022

Maintain an income tracking spreadsheet. If you don't have bookkeeping software or don't want to pay for it, you can manually track cash payments. Include who paid you, when you were paid, how much you were paid, and the nature of the work you did.

Transfer the money you get to your bank account. Any cash deposits you make to your account will be reflected on your bank statements, which you can use as proof of income. Note that this includes sacco statements if you use a Sacco current account for your transactions. 

Make receipts for those who give you cash payments. Giving your customers receipts for cash payments is a great option. 

Read Also: How to Pay Yourself as a Small Business Owner

Present your tax returns. If you filed your tax returns correctly, they should show how much money you made the previous year. When you are paid in cash, you can use this as proof of your earnings.

Can You Get a Loan if You’re Self-Employed With no Proof of Income?

Yes. However, if you have little or no proof of income, lenders may view you as a high-risk borrower. Even if you are able to obtain a personal loan, it may not be for a large sum, and the interest rate will most likely be high.


You are now aware of the types of records that can be used to prove your self-employment income. 

Here's a pro tip: if you're a freelancer or business owner, keep accurate and up-to-date records of your earnings in case you need them in the future.

You can enjoy all of the benefits of working for yourself and also have an easy time when you need financing since you can easily prove your ability to pay it back.

Read Also: How to Get More Out of the Money You Have in Your 30s 

Sheila Brenda Andoi is a communicator, journalist, editor, and writer passionate about human-interest stories. You can find her on Twitter @sheilaandoi

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