Creative Funding for the Self-Employed and Freelancer
Funding a business – whether it is small or big, freelance or not, full-time or part-time, a start-up or for growth – is always challenging, and is especially so when the economy has been less than stellar. But that doesn't mean that the money is not out there. It is.
You just have to know where to look.
Some of the Best Funding Options
Here are five great options:
1. Crowdfunding: Crowdfunding is one of those cool ideas that really only is possible because of the Internet.
Here's how it works: With traditional business funding, you either take on some debt and agree to pay it back, or share some equity and take on some partners. Crowdfunding is different. On a crowdfunding site like IndieGoGo or Kickstarter, you list your business or project and ask people to invest in it. Then, instead of paying them back with money or equity, you agree to pay them back with some “perk” from your business. Although the crowd invests small amounts of money (typically in the range of hundreds each, or less), by appealing to the masses, you can raise thousands.
Example: Say you want to open a food cart. You could create a crowdfunding campaign whereby you might agree to name various sandwiches after your crowdfunding investors. I heard of a campaign where a woman wanted to travel around the world and offered people a postcard from her various stops in exchange for small donations. It worked.
There is an explosion in business plan competitions right now.
2. Bank loans: I say this is a creative solution because there is a belief lately that banks are not lending to small or freelance-based businesses. Wrong. Banks are in the business of lending money, and they especially like lending to businesses. For example, I know that my friends at Bank of America are in the process of hiring 1,000 small business bankers nationwide.
Sure, it might be a little more complicated these days to get a loan, but so what? No one said all of this entrepreneurship stuff was easy. The money is there.
3. Business plan competitions: There is an explosion in business plan competitions right now. Communities see them as a way to attract and reward successful business ventures that can boost the economy, and universities use them to reward the best and the brightest. Winners win assistance, in-kind contributions, and yes, funding.
For example, the Rice University business plan competition “has grown from nine teams competing for $10,000 in prize money in 2001, to 42 teams from around the world competing for more than $1.3 million in cash and prizes” (alliance.rice.edu).
4. Business incubators: How great is this idea: Business incubators are, generally, public-private partnerships that also reward great businesses and startups with financial assistance. And the reason is similar to business plan competitions: The incubators want to foster entrepreneurship and boost their local economy.
While some business incubators offer funding, more typical is the incubator that offers its participants in-kind assistance and steep discounts, such as
- Free or cheap office and work space
- Clerical assistance
- Business and marketing assistance
- Financial and legal help
- Networking opportunities and mentorship.
Google “business incubators” and the name of your city or region and you will find some.
5. Investors: Entrepreneurs love OPM – Other People's Money. But how do you get it, and what do you need to do to show investors that your business is worthy of their trust? Of course you need a great plan, solid financials, and some secret sauce, but here's the thing investors really look at: your team. Having qualified and experienced people around you, people who already believe in you and have signed on for the ride, makes a huge difference in the investment game.
Yes, finding the money you need when you are self-employed and running your own business can be a challenge, but look around as you drive down the road. All those businesses did it, and so can you.
(To help with this, I recently wrote a book called Get Your Business Funded: Creative Methods for Getting the Money You Need. In it, I share more than two dozen creative ways to fund a business. You might want to check it out.)