Self-employment is a dream for many Australians. With Independent Contractors Australia reporting 17.2 per cent of Australians as self-employed it is unsurprising that many more are considering taking the leap.
One of the major barriers to beginning your journey as your own boss is a lack of start-up funds. As such, we’ve put together this brief guide to some solutions to the age-old problem of garnering a start-up fee.
The kindness of strangers
A recent trend in the business world is that of supporting independent businesses through the process of crowd-funding. This can range from asking for donations through a website to using a company specifically created to curate such projects. These curators allow new businesses and individuals to reach out to people all over the world to support their idea, sourcing small investments from thousands of people instead of a large investment from a few business-minded contributors.
This method can result in a huge amount of start-up capital if your idea ends up popular enough, and takes advantage of the viral nature of the internet. A little work can develop into a lot of interest very quickly. You are also marketing to users of the product, rather than business investors who may not be as passionate as the product as you are.
However, this particular method does have some downfalls. Without a very unique and popular idea, your business could fall well short of your goal. According to Kickstarter, approximately only 36.5 per cent of projects end up successfully completing. It is very much all or nothing.
An angel on your shoulder
The aptly named ‘angel investors’ are fellow entrepreneurs who have succeeded and are now looking to lend a helping hand to new start-ups, typically offering their own skills as part of the package. These investors tend to look for very early businesses so that they can help mould them in a successful direction. This can be beneficial as you receive both capital and the skills of somebody experienced in your field.
While you do get an angel, you also get them hanging on your shoulder. If you intended to enter self-employment to get away from bosses, you may find that your angel is moulding you in a direction that you did not want to take. You get the capital and the mentor, but do you want someone else having such a big involvement in the running of your business?
Using what you’ve got
Likely the easiest solution is to take a business loan from a mortgage provider. However, it can be difficult to find such a provider who is willing to lend to someone without a significant amount of current financial information. It is a double-edged sword: you can’t get a constant revenue stream without a loan, and you can’t get a loan without a constant revenue stream! So what can you do exactly?
Seek out ‘low documentation’ loans. These home loans allow you to borrow against your current residential property without an enormous amount of documentation. These are typically designed specifically for new business owners and self-employed people by mortgage brokers.
These less stringent loan requirements allow you open up capital for your business, invest in commercial real estate for a physical store or even just smooth out the usual cash flow fluctuations that every new business suffers from.
This method also gives you the freedom that angel investors and capital venture companies do not. While of course you do still need to make repayments, you do not have investors looking over your shoulder to make sure that you are doing everything their way.
Low documentation loans let you develop the business the way you want, and isn’t that the whole point of self-employment?