Freelancing comes with a lot of freedoms, like deciding what projects to take on and when you want to work on them. The money can also be great if your expertise leads you to clients that really need it. One of the more difficult parts of freelancing, however, is having to come up with your own funding to start or keeping the cash flow going between jobs. Whether you need a new laptop for graphic design or writing, or need the right kind of vehicle for your services, landing the money you need to succeed can be overwhelming.
Take heart, though. There are some savvy ways to find the funding you need to get your freelance business up and running. Take a look at a few tips for making it happen:
Consider Online Lending Platforms
The chances of walking into a bank and landing a traditional loan for your freelance business are slim. For one thing, it’s difficult to create a business model when you aren’t actually selling any goods. There are also tax liability issues. Freelancers are sole proprietors which means that they do not need to file separate business taxes. This blurring of personal and business tax data can be a headache for banks who can’t rely on an actual business to repay the loan. Freelancers are also one-person shows. If you are sick, or ill, or worse, a bank can’t depend on your business to continue operations as normal – making the loan origination a risky liability.
There are other deterrents for banks to loan you money like personal credit and how long you have been in business. Most banks won’t even talk to you about a loan until you’ve had a least two years in business. If you make it over that hump, then your personal credit and assets will come into play. Depending on your credit score, big banks may ask you to personally guarantee the loan using your house or other assets as collateral.
Thankfully, online lending platforms can help bridge the gap. Sometimes crowdfunding sites are effective, but they are also jam-packed with people just like you looking for funding. Another option is a business lending platform that matches investors with the right business opportunities. In just three months of operation, online lending platform LendGenius reported more than $6 million in loan originations. There are investors who are looking for the next great business idea or freelancer to fund, and they don’t always come in the form of a person sitting behind a desk at a local bank.
Check out the Small Business Administration
The SBA has many resources for people who do not fit the traditional model for small business lending, like freelancers. Many freelancers use microloans to get started since the average SBA microloan is $13,000 with loans all the way up to $50,000. This is usually plenty for freelancers to buy the equipment they need and start marketing to their target audience. One important lesson as you start out is to stay away from getting into too much debt but having enough funding to have a cushion as you you’re your client base. You cannot actually land a loan from the SBA but the organization will guarantee a percentage of what you need so you are a smaller risk to lenders. Check out the 7(a) and Microloan programs specifically for freelance funding needs.
Consider Grants
Depending on your area of expertise, you may qualify for a business grant. The obvious upside is that you won’t need to repay it. Competition is tough, of course, but it may be worth your time to give it a try. Women and minority freelancers may even be able to find grant programs specifically designed for them. Veterans owned business are also eligible to receive grants from government agencies as well as private funding. Contact your local government and research federal grant websites to find eligible grants for your small business.
So which form of freelancer funding is the right fit for you? Maybe all of them. Do a little research into your industry, and make sure you check out the SBA resources. Get started on the right freelancing foot with the funding needed to succeed.
