The traditional nine to five job market is rapidly disappearing and the gig economy concept is starting to take its place.
In the United States and Europe, over 30 per cent of the economy’s labour is now a part of the gig economy. In the United Kingdom alone, you are looking at over five million people working in this way.
The flexibility and allure of defining one’s own hours and having a better work-life balance are both great advantages, and the trend is predicted to escalate. According to OddsMonkey, almost half of the UK workforce is expected to work remotely by 2020. Furthermore, according to a 2016 survey published by the TUC, home working has already increased by 19 per cent in the past decade.
While many are flocking to freelance, casual and remote jobs, self-employment does come with challenges, one of which is financing. If you are considering joining the world of freelancing, or building a work from home business, read on.
You may have challenges funding your freelance business, as banks can sometimes seem uninclined to lend to customers they perceive as “high risk.” The unpredictability of work is an undesirable trait to lenders, who are looking for assurance their capital will be repaid.
So, with the gig economy booming and more companies hopping onboard to support the shift, how can you overcome the financing hurdle and get yourself set up as a freelancer?
Look at your personal borrowing ability
With business loans being a bit more tricky to acquire as a freelancer or a home worker, personal borrowing and credit can sometimes come in handy. Each year, personal loans contribute more than £23 billion to the UK economy. Personal loans from your local credit union or community bank can get you started on building your business.
The downside is that such loans sometimes have lower limits than business loans. But by choosing to borrow as an individual, you avoid a chunk of success criteria applied to business loans such as finance ratios, projections and business plans. Another option to consider is the use of microloans.
Finally, we have the use of credit cards and personal lines of credit. While these can carry sizeable interest rates, credit cards are widely available. If you research properly, you can find lenders offering promotional offers such as zero per cent interest for a specified time, or loyalty points and bonuses.
Obviously it’s essential to realise that taking on personal debt to fund a business venture carries risk, and is not a decision to take lightly.
Consider alternative finance options
Over the past decade, there has been an uprising of online, peer to peer and alternative credit lenders, who are changing the landscape of finance as we know it.
Nowadays, there are lots of new lenders who are looking to lend to businesses and individuals online, and borrowers are beginning to recognise that.
In 2017, the UK saw peer to peer lending top £3.1 billion and the final quarter saw a massive £836 million borrowed, as cited by the UK Peer to Peer Finance Association. There are also now collaborations between banks and alternative lenders, with banks recognising the competition that FinTech companies are bringing to the industry. As with all investors, lenders are looking for a return on their investment and P2P platforms are a great place to match investors with business ideas that can provide them with that return. Thanks to a growing number of lenders joining the online marketplace, the chances are you will have more than one option to choose from.
Check out crowdfunding and business schemes
The United Kingdom government and other professional agencies sometimes offer startup or entrepreneurial funding aimed specifically at those looking to make their ideas a reality. Once you have a solid business plan and a viable model, there are many schemes you can apply to for either loans or grants to get you started.
Many organisations also have experienced business advisors on hand to help you to refine your business model and grab the best chance of succeeding in your freelance or home based business. Individual banks’ websites usually offer a wealth of information on start-up schemes available, and there are also plenty of private sector support schemes.
The landscape of the workplace as we know it is changing. With more workers choosing to work remotely or redefine their work hours, the face of business finance has also changed. However, starting your work from home business doesn’t have to be daunting when it comes to financing. With just a few minutes of research, you can discover a range of funding options available to you today.
This article is for information only and not intended as financial advice.