So you have possibly heard the hype – digital marketing is in a stern demand and booming, that is why brands are putting more attention and focus on it than ever before. And that is enough reason why digital marketing is considered as a money-spinning and popular market to get in.
Building a digital marketing company can be one of the most gratifying businesses you’ll ever create. Because in the long run, it recompenses major dividends. But starting your own company can be confusing especially if you don’t have so much ‘how much’ to back up your startup.
Some aspirants opt to apply for a loan, some others use their cash savings and other sources of personal finances. So in this article, let’s take a look at how you can use these personal finances to get your digital marketing startup started. Read on.
1. Use Retirement Account
With the bank’s hassles and stricter requirements, more people are now turning to a more personal source to fund their business startup: their retirement accounts.
There are actually two ways to utilize your retirement money to fund your digital marketing startup. If you have at least $50,000 kept up in your retirement account and need that much or more for your business, the best choice for you is to opt for “Rollovers as Business Startups” (ROBS). But for smaller amounts, you might consider taking a loan from your retirement plan.
ROBS makes use of your retirement funds to finance your business without the need to pay taxes or early withdrawal fees. This source is not a loan, therefore there is nothing such as a monthly payment that needs to be made immediately. It’s a better way to get a capital for your business without burdening it with debt. However, bear in mind that taking this type of financing also means risking a part of your retirement funds.
2. Use Personal Loan
A personal loan is a type of unsecured loan to help you meet your current and immediate financial needs. Here, you do not need any security or collaterals. This type of loan gives you the flexibility to use the funds as per your convenience and needs. Applying for personal loans is a good choice to get an instant cash to startup your digital marketing business.
Personal loans can be obtained from your local bank or from online lenders such as Lending Club and Prosper. But these two needs a good credit score (660+ for Lending Club and 640+ for Prosper).
On the other hand, if you are worried about your credit stand, you can benefit from applying for a loan from SoFi or Upstart. Also, people who don’t have stellar credit can turn to Avant which is the only personal loan service that considers those with credit scores under 600.
3. Use Consumer Credit Cards
Credit cards are openly available to finance individuals immediately after you have been approved. These are relatively inexpensive and last resort to get a funding for your startup digital marketing business. Also, consumer credit cards commonly offer a promotional APR or some rewards programs to which you can benefit a lot. Even when not on a promotional, credit cards always have a relatively lower APR ranging from 8-24%.
However, you need to have a good credit standing to qualify for a good card that you need for your business. And remember, there are some things like payroll that could not be paid with a credit card.
4. Use Home Equity on Your property
Home equity loans (HEL) or home equity lines of credit (HELOC)are good preferences that work fine for those business owners who are short on cash but have lots of equity in their real estate. They can be an excellent way to channel personal funds into a digital marketing business. These types of personal funds often offer very low-interest rates ranging from 2.5-8% annual percentage rate.
However, these rates could be adjustable and sometimes require an immediate refinancing. And once you fall behind your payments, the risk of losing your own home is always present.
5. Use Loans from Relatives
Money borrowed from your friends or relatives is just right for people who want to finance their business startup but are struggling to find funds in other places. And it goes like this: if you borrow money from someone you know, you can ask them to actually invest in your digital marketing startup in exchange for an ownership share or they could eventually get a loan from the business.
Loans from someone you know typically offers speed in funding. At the same time, there are no such credit or collateral requirements. But, when opting for this type, your inability to repay what you borrowed can hurt relationships. Also, unsolicited business advice from “investors” are always present. And those with equity or ownership share are legally entitled to some control over your business.
6. Use Cash Savings
This is for those individuals who have a considerable amount of money in savings and either don’t have time to wait for funding or don't want to take on additional debt outflows.If you have reserved enough money in a savings account or investment portfolio you have the options of funding your digital marketing business without any debt. You could also select to loan the business money from yourself.
Using your personal cash savings clearly spares you from paying creditors interests rates and you have the freedom and complete control over how you use the money to run your humble business. But remember, when you use your personal savings, there are some potentials for liquidity issues and you might not leverage your savings.
At some point or another, most startup businessmen count on personal funds to finance their digital marketing business. However, it’s really essential to weigh the risks of investing your personal money into a business and to always have a plan B in case things don’t work out as planned.
Aisha Workman is a financial solutions adviser at Cash Mart SG. She works in financing for over 5 years and is an authority on emerging financial services. She's also a speaker at financial planning conferences and visual learning events around Singapore.