Audio Posts and Shared Links Audio Sources - Full Text Articles

Here’s how to fund your side hustle without going broke

Arielle Loren sits at a desk with her laptopArielle Loren, the founder and CEO of 100K Incubator.

Arielle Loren

  • If you’re starting a side hustle, there are many ways to invest in your skills without going broke.
  • Funding expert Arielle Loren advises people not to seek funding until they have proof of concept.
  • She also suggests four methods of funding a side hustle once the entrepreneur is ready to scale.

If you’re thinking of starting a side hustle, there are many ways to invest in your skills without going broke.

Today, it’s easier than ever to start your own business or side hustle because all the tools you need are online. Plus, many are free or affordable. This digital revolution is one reason 10.5 million Americans created businesses between 2020 and 2022.

With more tools and platforms available online than ever before, many side hustles require little to no funding up front. And the rewards can be lucrative: Some side hustles, like virtual assistance and copywriting, can net entrepreneurs six figures in revenue.

Arielle Loren is the CEO and founder of 100K Incubator, a business-funding app for women. Her program teaches entrepreneurs about three levels of funding based on their amount of revenue. Side hustles typically fit within the first category, since they normally make less than $3,000 a month, she told Insider.

“Side hustles are a great way to dip your toes into the world of business,” Loren, a Harvard alumna, said. “It’s the perfect way to ease into entrepreneurship.” 

Loren shared her tips for funding your side hustle and how to choose the best option for your needs. 

Give it 3 months before taking capital

You can use some personal savings or dip into your monthly income to pay for initial startup costs, Loren said. But she advises waiting three months before taking larger amounts of capital to grow your business.

Entrepreneurs should use those three months as proof of concept: Determine whether you have enough consistent sales to keep the business going. If you don’t, cut your losses.

“If you’re not making quick money, then is this really a side hustle?” she said. “Or is this a business that’s going to need a lot more capital and with a longer-term plan?”

Capital can give you a competitive edge

Once you’ve determined your side hustle is making enough money, it’s important to map out how you’ll use funding. The most common reason for funding a side hustle is to invest in marketing and customer acquisition to give your business the competitive edge it needs to grow, Loren said. 

For example, if you invest $1,000 in social-media ads to get your sales up to $2,000, that capital investment has now doubled your profits. “No one should be taking out capital unless they’re really clear about their numbers,” she said.  

4 funding options for a side hustle

Then, you should calculate how much funding you’ll need. A side hustle allows you to be more conservative about the amount of capital you take since it’s not a full-time business, Loren said.

“The majority of capital that you’re going to be seeking is probably going to be a small amount,” Loren said. 

For businesses making less than $3,000 a month in revenue, she suggests four funding options to help you scale:

  • Business credit cards are an easy, low-risk way to build up your business credit without having substantial revenue, plus many come with benefits and perks, like miles, discounts, and cash-back deals.
  • Personal loans from a bank are based on your income and personal credit, so they can be easier to get if you have a good credit score and high income.
  • Home-equity lines of credit disburse large amounts of capital incrementally at interest rates that are very low compared with most small-business loans.
  • Crowdfunding can help you identify and gain target customers but works best for early-stage entrepreneurs if they already have a large following. Otherwise, they’re more of a marketing campaign.

“The difference between a side hustle and a business is really just a matter of the time that you put towards it but also the revenue that’s able to be generated from it,” she said. “That also impacts the capital that you end up taking on.”

Read the original article on Business Insider
WP Radio
WP Radio