The freelance industry is picking up pace at an exploding rate. It is primarily a favorite of millennials for the freedom it offers. After all, who likes to get up at 7 in the morning daily? Gig-life has changed the scenario. Many of us can now decide our workload without any pressure from a boss. We can choose the hours we work for and finish our jobs while sipping a cup of coffee on our couch. But freelancing is not all rosy; it comes with a new set of challenges that need a resolution from our end. The biggest challenge for a freelancer is obtaining funding as there is no fixed monthly income and a guarantee to earn for repaying the loan.
Funding options for a freelancer
For a salaried individual, banks and financial institutions can provide financial assistance by verifying his income source and credibility. But in the case of freelancers, these financial institutions are skeptical to release funds due to uncertainty of income in the future. Even if you have a regular inflow of money to your bank account, a bank might refuse to provide you any funding due to the uncertainty involved.
A freelancer is like a sole proprietor who is liable to pay his debts himself. If he fails to repay his loan, the bank is left with a massive loss as there is no salary to recover the loan and interest amount.
But, there are other options available to a freelancer. You can always borrow money online like, resort to local moneylenders, take help from your friends, etc. Let us discuss these options in detail to help you get funding as a freelancer.
· Taking a personal loan
Banks and financial institutions like funding circle check the credibility of a business before granting a business loan. Only well-established companies can secure funding that, too, if they are profit-making and have low debt and good credit rating. For a freelancer, it is almost impossible to obtain a business loan. A personal loan from A1credit , therefore, is the alternative available.
These loans do not want to know anything about your business. They will verify your credit score, bank statement, and income sources to ensure the repayment of their amount. Personal loans get quickly approved if you have an excellent financial history. The amount of credit you will be approved of depends mostly on your repayment capabilities determined by the lender.
· Resort to Crowdfunding
Crowdfunding is a relatively new source of securing funds as a freelancer or a small business owner. There are several crowdfunding websites where you can list your project or services for getting funds. The interested investors will provide you the money in exchange for your services or access to your work. The most significant advantage of this type of funding is not having to repay the amount at all. You need to provide your services to the lender in the future.
· Opting for a microloan
Microloans are tiny loan amounts granted at low-interest rates to the individuals in need. Freelancers can get funding through this source quite quickly by showing a regular inflow of money to their bank accounts. The most significant advantage of a microloan is its low rate of interest as against a traditional loan. It is most suitable for you if you need a small amount of up to $30,000 as a loan. Many microloan companies also offer loans to women, minorities, and veterans who might not be able to secure a traditional loan due to variable income.
· Using Line of Credit
You must have heard about banks offering lines of credit to its customers. These days, many online moneylenders have also started offering the service at reasonable rates. Line of credit works quite similarly to a credit card. The amount of loan granted to you can be withdrawn as and when required. You don’t have to pay interest on the whole amount, preferably on the amount you spend. It can also be linked to your credit card for further convenience.
· Implement invoice financing
If you receive money from your clients through invoices, you must implement invoice financing for securing funds. You can keep your invoices as collateral and receive a loan against them. Another method of acquiring funds through your invoices is to completely sell them to your lender instead of keeping it as a collateral. This is known as invoice factoring and brings you an amount a little less than the amount of your invoice, the difference being the interest charged by the lender. In case of emergency, you can always use your invoices to get immediate funds.
· Use Business Credit Cards
Business credit cards work just like your credit card. Having an additional card, however, allows you to get more funds when you need them. Since all freelancers incur a cost to earn money, you can cover those business expenses by utilizing the limit available on your business credit card.
The lender will set a maximum limit to your card, depending on your income sources and credit rating. You can withdraw and use that amount whenever the need arises, with interest being charged only on the amount you withdraw. Your limit will be reset again once you repay your principal amount. Many lenders also offer reward programs through business credit cards, which can lead to additional savings for you.
Wise Words
Taking a freelance route is not an easy job. You don’t know whether you will earn enough money to pay your bills the very next month. But with the funding options discussed above, you can surely concentrate on your freelancing efforts without having to worry about your financial emergencies. Just ensure to maintain a good credit rating and repaying all your financial obligations on time as it will help you secure funding when you need it the most. Work hard towards building a solid business plan to repay the loans you have taken.
And last but not least, do not forget to read the terms and conditions of the loan you are planning to acquire. You don’t want to end up paying more later. It should benefit you and your business in the long run.
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