Where to get funding to grow your business
Investors will usually provide capital in exchange for equity—an ownership share and active role in the company, which includes a portion of the profits. In most cases, investors will require your business to be an LLC or a corporation.
Lenders like banks or credit unions offer business loans that can be paid back over time. Getting a business loan as a freelancer or small business owner can be challenging, particularly if you are a sole proprietor. Lenders often view freelancers as a risky investment. With significant income fluctuations, no protection against liability, and no backup in case of a personal emergency, you could end up unable to repay the loan. US Small Business Association programs are available that can guarantee a percentage of your loan, reducing the risk to lenders.
Other self-employed funding options
- Personal loans determine eligibility based on personal credit and income, rather than business financials. Personal loans can be easier for freelancers to obtain, but they may come with higher interest rates, fees, or penalties.
- Lines of credit, such as a personal or business credit card, can be used for expenses up to a certain limit.
- Invoice financing provides capital based on outstanding invoices, and can help to smooth cash flow while you wait for payments to come in.
- Crowdfunding raises money through the broader public, providing a reward or perk in exchange for capital. If you choose to raise money through crowdfunding, you’ll often do it through an online platform that will take a percentage of the money you raise.
- Grants are available to certain types of freelancers at a national and regional level, especially those who work in the arts.