Equity capital is necessary for the implementation of the business idea and for that you need to find business funding. That is for certain! However, many start-ups do not yet know how large the choice of alternatives to traditional capital raising is.
Opportunities for self-employment without equity
“Self-employed without equity? How is that supposed to work?” you might ask yourself. “It’s completely absurd.” This is how most founders react – wrongly. The first savings can often be achieved at the beginning through simple considerations before you need to find business funding. Thus, the establishment of a company is of course much cheaper than the establishment of a corporation.
In addition, a business project that requires large investments such as machinery and personnel is more difficult to achieve without equity capital. Even a small office costs money, so why not work from home? Of course, these considerations must also fit with the foundation.
All these small decisions can save a lot of money and with the right tips, start-ups can find business funding. Banks often offer start-up funds, support programmes and guarantees the opportunity to become self-employed even without equity capital.
Start-up by franchise
With Franchising if you are interested in starting a business without equity capital. More and more providers are recognizing that access to a successful franchise partnership depends on personal skills and not on financial background. With these franchisors, interested parties can apply as licensees and perhaps become self-employed as franchisees after a short time. However, interested parties should consider such concepts well.
Subordinated loans from a holding company
With the subordinated loan of an investment company, founders can receive a 100% exemption from liability. Medium-sized investment companies are self-help institutions of local business associations and chambers of all sectors, insurance companies and banks as well as funding institutions of the federal states. They support promising business ideas with capital and know-how. When this “public loan” is repaid, generous special terms such as grace years and a low interest rate are granted, regardless of collateral and risk assessment.
Burden on property and assets
In some cases, equity can also be used to charge pension insurance or home ownership. In this way, one does not provide liquid equity, but equity capital in the form of property and assets. Banks in particular place potentially great importance on this form of security deposit. Loans can be granted with a sufficiently high amount of insurance to cover the loan. The same applies to residential property. If the founders are in possession of a house or apartment, they may provide the bank with a stake in their property in return for a loan.
Problems with the bank? You can often obtain capital from private individuals via an online loan. This is organised via a platform on the Internet – without the involvement of banks.
Funding from guarantee banks
When it came to obtaining credit, credit institutions distinguish between “refinancing” and “credit risk”. It is often a problem for founders to prove that they are taking risks. One option is guarantees from a bank that are considered to be full collateral for all credit institutions.
Guarantee banks are promotional banks, which are organised in the private sector and supported by the federal or state government. The aim is to support companies and freelancers in their financing. In addition, there are independent guarantee banks in each federal state, which hardly differ in their support activities. The guarantees are full collateral for all credit institutions.
In the context of a business start-up, a guarantee bank may assume the function of risk-taking in credit transactions. In other words, they provide full collateral for all credit institutions. The guarantee bank therefore pays if the borrower, in this case the founder, is no longer able to meet his credit obligations and other collateral has already been used. The borrower’s debt is transferred from the credit institution to the guarantee bank.
Crowdfunding for your project
Crowdfunding, also known as crowd financing, is a method of raising capital through which you have your business project financed by the so-called “crowd”. As a project starter, you set a funding goal that you want to achieve with the help of the crowd. Basically, people invest in projects that they find interesting. Therefore, in addition to the idea itself, the creation of the campaign is decisive for further success.
If people from the crowd support their campaigns, they get a small “thank you” in return. For example, a book can be a discount on the purchase price or a separate copy from a certain amount of donations. As a rule, the call for participation in a business project takes place on the Internet.
On a crowd funding portal you can present your business plan and promote it for investors. There are a variety of crowdfunding portals.
Conclusion on self-employment without equity capital
Self-employment without equity capital can work, even if it is certainly not easy. Therefore, we should, above all, take sufficient time to think through the various alternatives. It is important that business founders still have sufficient reserves if the business idea does not work as previously planned.
If founders choose to take out a loan, they should make a detailed repayment plan and include repayment in monthly expenses. A recommended capital raising through a loan, with which founders can draw on their equity as a reserve. Opportunities such as a franchise start-up or crowdfunding can also be very promising, depending on the business model.
