Entrepreneurship and the prospect of being your own boss seem attractive to many people. Running your own business may come with a lot of freedom. You get to decide on your hours and how to manage your operation. For many business owners, being self-employed gives them a sense of control over their finances and earning potential.
With the current economy being as unstable as it is, many folks consider starting a side hustle to supplement their income and to serve as a safety net should they lose their jobs. Others may take the plunge and quit their full-time jobs to commit to being full-time business owners.
While being self-employed has many advantages, you need capital to start a new business. It’s often best to start small, keeping your overheads low, but you’ll still need some money. Whatever your business idea is, consider the funding options below to raise the capital to get your start-up off the ground.
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Keep Your Job
If you have a job, it’s advisable to keep it until the business is profitable and you can draw a salary. New companies are seldom profitable initially and can take anywhere from a couple of months to a few years to turn a profit. Keeping your job and working on your business after work hours will allow you to earn an income to live on and may also provide capital to run the business.
Even if you have money in savings, it’s a good idea to still hold onto your job. It’s challenging to forecast when the business will become profitable. And if you’re out of a job and your savings run out, you may struggle to grow the business and will also have no income to live off.
Apply for a Personal Loan
As a new business owner, you’re unlikely to qualify for a business loan, as these are typically only granted to established businesses that are financially stable. Still, it’s possible to secure a personal loan to fund your business.
Entrepreneurs with high credit ratings will likely be fine securing personal loans from traditional lenders like banks with favorable terms and lower interest rates.
If you have a low credit rating, banks are unlikely to approve your loan application for a personal loan. So instead of applying through a bank, search for lenders that offer bad credit loans. These loans are designed for people who have poor credit. Many companies offer bad credit loans, each with different interest rates and terms. So comparing a few loan offers is beneficial before settling on one.
The easiest way is to apply online on a lender’s website or via a lending network. A lending network is typically more efficient, as you just have to submit one application that is sent to a few lenders. The lenders will review your application and forward you loan offers for you to look over.
Since bad credit loans are considered riskier for the lender, they usually come with higher interest rates and shorter terms. Still, it’s possible to find one that suits your business needs and that you can comfortably repay.
Get a Business Partner on Board
When it comes to business partnerships, there are several models that you can explore. Some entrepreneurs may opt for a silent partnership where their business partner provides capital and is paid dividends when the business is profitable. Others may prefer a partnership in which the partner is involved in running the business and making decisions.
The latter option may be helpful, especially if you have another job, as the pressure of operating the company will be shared. Having a partner with business experience may also help grow the business faster.
Before agreeing to a partnership, it’s vital to draw up a contract. The contract should stipulate how the business will be split based on how much the partner invests and their contribution to the company. Also, decide how decisions will be made, who is responsible for what, and who will have the final say. All of these factors must be documented in the contract to prevent disagreements in the future.
Last Words
While owning a business can be an excellent opportunity to achieve financial freedom, you need capital to get a new company up and running. There are several options for funding a new business, including keeping your job and using the income you earn for the company, taking a loan, or getting a business partner to invest.
References
- Bplans: 40 Proven Ways to Fund a Small Business
- Altline: Ways to Fund a Business without a Loan
- Investopedia: Crowdfunding
- Profitbooks: 10 Funding Options To Raise Startup Capital For Your Business
- Ansarada: How to Raise Capital
- Startupdonut: 10 options for funding your small business
- Fundera: 15 Best Sources of Startup Funding in 2022
- Aofund: Where Can I Get Emergency Funds for My Business?
