5 ways to fund your startup as a solopreneur
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While there are many ways to finance your new business, many options are expensive, require collateral (such as personal property), or involve the involvement and expectations of other people (as in the case of loans between friends and family, angel investor funding or venture capital funding). If you prefer to self-fund your businesses, here are five smart ways to fund your startup as a solopreneur.
Related: 4 Totally Awesome Reasons Why It’s Awesome To Be A Solopreneur
Open an emergency account
A great way to start your business is to open a savings account. We’ve all heard the famous saying that “cash is king”. If you have already set aside funds to start your business, use your savings account as a central location for all the money to start your business.
Depending on your type of business, you will need to set aside funds for legal fees (such as trademark filings), building your online presence, and costs of goods. You should always have a separate savings account for any personal expenses that may arise. Never use all your savings just to start a business.
Open a credit card
A second way to fund your business is through credit cards. If you must use a credit card to fund your business, ask for a credit card that offers 12-18 months of 0% APR interest, a high credit limit ($25,000 or more), and at least 2% cash back. This will allow you to quickly start investing in your startup while having at least a year to build up your revenue and profits. But, you’ll want to make sure that before the interest rate kicks in (after 12-18 months), you’re able to pay off your balance in full.
Credit cards can quickly lead to costly debt and high interest rates without payment discipline. Keep this in mind when evaluating this option for financing your business.
Related: 4 Differences Between Solopreneurs and a Solo Entrepreneur
Open a personal loan
A third way to finance your startup as a solopreneur is to open a personal loan with a bank. Since most traditional banks require collateral (personal assets) to secure a loan and usually only offer short-term loans that require repayment within a few years, a smarter option is to apply for a personal loan from a bank. an online bank that offers competitive rates, such as SoFi.
For example, if you have good credit (credit score of 750+), you could potentially get a $25,000 unsecured personal loan with a 5-year term, 12% annual interest rate, and payment monthly about $600. Apart from giving you an extended period to repay the loan and creating a positive cash flow in your business, it also helps boost your credit score. Another added benefit of this option is that you can request to refinance a loan after three months of payments, which can potentially lower your monthly payment and interest rate.
Use “buy now, pay later” programs
Another way to finance your new business is to outsource your sales payment. If you run an online business, tools like Klarna Where After-payment pay your business for purchases made by your customers, while allowing your customers to pay in easy installments at later times. These types of “buy now, pay later” systems are particularly useful for your customers if your site offers more expensive products (such as high-priced courses, luxuries, or home furnishings) and encourages them to place orders, even if they want to pay over time. These programs allow your business to have cash immediately, without extending credit to customers (which is a risk for any business).
Related: 10 Ways to Fund Your Small Business
Launch a Kickstarter
And finally, the fifth way to inject money into your new business is to launch a Kickstarter campaign. This crowdfunding site allows business owners to raise money from potential customers and people they know. It’s also a great way to increase online visibility, build brand awareness, and test the viability of a business idea with real feedback.
The best way to get people to invest in your business through Kickstarter is to leverage your social media channels to spread awareness about your campaign. It also helps create a sense of community and engagement around your brand, which leads to customer loyalty.
Another thing to keep in mind when evaluating your budget for your startup is that you can save thousands of dollars every month by not hiring expensive agencies. Many PR firms charge at least $5,000 per month to send out a single press release, and several Facebook ad agencies charge a minimum of $10,000 per month to run ads for your business. Not to mention that they cannot guarantee advertising or sales conversions.
As you can see, there are a variety of ways to fund your new startup as a solopreneur without having to bring in investors or partners. Depending on your goals and starting point, each of these financing options has its pros and cons. Do your research and evaluate funding avenues when planning to launch your business.
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