Anyone looking for financial and time freedom knows that having a business is one of the best ways to achieve that. But it is challenging when money is a problem, to begin with.
Besides having limited income, low-income households are less likely to qualify for a business loan right away. Lenders could ask for more proof they can afford the repayments. Otherwise, these loans will come with hefty amortization payments.
Those who want to start a business now but are not confident with their financial position can consider these ideas:
1. Secure a More Affordable House
Low-income earners with less access to more capital could bootstrap, but that would mean relying mostly on their wages, which they also use to pay off their debts.
To spare more money for a business, they could look into reducing one of their biggest household expenses: mortgage.
- Apply for state down payment assistance – For those with small amounts of money to use on a home, it may be possible to secure a state down-payment assistance program. Some of these programs require the person seeking assistance to be first on the property title while others do not. Either way, this financial aid, which is often a grant, can potentially help lower the interest rates of their monthly repayments.
- Secure home loans with low to zero down payment – Mortgage programs like VA and FHA loans have specific funding authorities that allow them to offer low-to-zero down payment loans. They also do not require a high credit score.
- Buy a property that needs some repairs – Buying a fixer-upper as opposed to a move-in-ready home is one of the most affordable ways to get a house. In some cases, buying a property that needs some work now may allow someone to buy the place for less than 50 percent of what it will be worth after repairs are made. In the meantime, the new homeowner can gradually make the repairs as money comes in.
2. Search for an Angel Investor
Finding affordable capital is one of the biggest challenges faced by entrepreneurs. Those who struggle with this can find someone who will. These include angel investors.
What is an angel investor? Angel investors are affluent individuals who invest in small businesses that they believe in. They usually provide enough seed capital to help entrepreneurs get their projects up and running.
Unlike venture capitalists, angel investors are more likely to help young startups as long as they can see that the business has potential, as shown by their business plans and financial projections.
There are websites like AngelList Venture where investors may peruse profiles of startup founders seeking funding. Many angel and seed funds operate out of state. Researching what each has available can help one determine if there are potential investors in the area.
If not, low-income entrepreneurs can find people who can assist with funding through alternative means like online social networks. One can also do networking in your community. The local YMCA, church, or other non-profit organization may have events through which business people can meet others interested in their product or service.
3. Take Side Hustles
Usually, people have two popular ways to increase their capital if they are self-funding: increase their income or reduce their expenses.
Those who want to do the former can consider taking on a secondary job or working as an independent contractor. Many companies also provide extra compensation for employees willing to find and implement new ways of increasing revenue. This may include taking on additional responsibilities or making changes that other workers are not comfortable with.
They can also pursue a side hustle. A side hustle is a second job that allows one to make money in their spare time. While some people set up shop on social media, selling goods or services to people they already know or work with, a side hustle can also be something one can do for cash.
If one has a skill that allows them to provide a product to other consumers in the area, they can use it as a way of making additional money while getting the business off the ground. Some great hustles include:
- Using a ridesharing service like Lyft to make money on their schedule
- Renting out the home or a room in it while they are not using it through Airbnb
- Becoming a virtual assistant through UpWork or other freelancer networks
- Cleaning yards, windows, and gutters for neighbors
Low-income entrepreneurs need to know that they are not alone in their fight. With some hard work, dedication to their ideas, and following the tips outlined above, they have a chance of being successful.