Starting a business is already quite difficult as it is, and entrepreneurs normally do not want to deal with any additional circumstances that will further complicate their entrance to the market. After all, overcoming the adversity associated with the early stages of new brands’ lives comes with a plethora of problems. Thus, those who have the option to simplify this part of the process will almost always utilize it. Well, one such option is to apply and take full advantage of external funding that comes in the form of self-employment loans.
For those unfamiliar, these types of loans are offered to independent contractors or freelancers that are generally compensated through 1099s, schedule Ks, or similar. They became popular a long time ago when the government wanted to incentivize small business owners to pursue their dreams in order to help the country develop. Nowadays, there are millions of people who fit this description and small businesses are the most common entity type in the United States. So, what are some ways in which self-employed loans can help ventures in their early stages?
Buying Inventory, Paying for Office Spaces, and More Reasons to Have Quick Access to Funding
For the vast majority of product-based businesses, holding a decent amount of inventory is a mandatory requirement of doing business. This ensures that the company will be able to handle any volume of orders at any given point in time. Similarly, businesses that rely on face-to-face interactions to make conversions and facilitate transactions will have to rent or build office space. Well, it comes as no surprise that these types of expenditures can be quite pricey. For instance, purchasing inventory is most commonly done in bulk quantities while office leases are almost never shorter than five to ten years in length.
What does this mean for the entrepreneur in question? It means that he or she will need to have a lot of capital that is highly liquid from the beginning. That way, they will be able to pay for these types of inquiries before their business actually makes any real revenue. So, self-employed loans can come in handy and satisfy the need for quick access to funding that one may otherwise not have.
Investing in the Future
Although a loan of any kind will usually be focused on present-day objectives, business-based borrowing can be viewed as an investment in one’s future. This is because practically all lending agencies rely on credit reporting to ensure that they are receiving their monthly payments. Thus, business owners that are making their loan payments on time will be able to improve their credits and apply for more funding down the road. Thus, if there is some expansion in the future where the loan amount has to go far outside the previous borrowing ranges, having solid credit will make such situations much more bearable.
Helps Avoid Selling Equity in the Business
According to specialized financing firm, Associates Home Loan, countless businesses make the mistake of selling their equity to get funding. The reason why this should be the last resort is that it will generally cost one a lot of money in the future. For instance, selling 10-percent equity in a growing brand will mean that one is giving up a piece of their company for what is ultimately a price that undercuts them.
As long as the business owner knows that the brand will grow and sees a clear way to achieve this, they can expect that their equity to be worth much more in the future. So, selling it at present value will do nothing but undermine their effort to lead the brand in the direction in which they would like to. Thus, getting a self-employed loan could be a much more beneficial outcome to this scenario that will let the original owner maintain their equity stake.
Simple Way to Get Funded
Unlike a lot of alternatives in the market, relying on self-employed loans from large providers is generally much easier. First, the entire process will not be based on a never ending amount of paperwork, as tends to be the case with common loans that dominate the real estate and vehicle markets.
Instead, loan providers tend to be satisfied with a few previous tax return transcripts mixed with some credit inquiries and a potential security device. Associates Home Loan explain that security device as something that is usually a business asset that the bank will treat as collateral in case of a default on their loan. Thus, as long as the business performs well and the monthly payments are made, one has nothing to fear!
