The COVID-19 pandemic was a crisis that nobody ever thought would manifest. No crisis is ever predictable and every crisis will always cause a widespread upheaval. While these last few months have been a trial for many, a crisis doesn’t develop character, but rather, it reveals it. And this crisis has revealed a great deal, whether it’s who our true friends are, which government officials deserve our votes, and our varying degrees of resilience.
The pandemic has also revealed that there is a real need for people to secure a secondary means of income. Not only are many business owners confined to their homes for the foreseeable future, but there’s a looming recession bound to hit post-pandemic.
Setting up a business might be one of the best things you can do during this time, but because of the difficulties imposed by COVID-19, it may be difficult to source funds for your business. It’s important to know the options that are available to you in order to get your business off the ground. Let’s explore them here:
This will almost always be the default option for funding a business. However, this doesn’t mean it’s the best option for every business, as you need to have a very high growth potential and a wide market. Securing venture capital usually takes six months under normal conditions. However, it should be noted that during recessions (or pandemics), venture capital might take much longer to secure.
A government business grant refers to money that is granted to a business by the government. Government business grants are essentially free money that the recipient is not obliged to pay back. The aim of business grants is to help get small businesses off the ground, which, by extension, helps in creating jobs and increases the opportunities and benefits for a community.
While this may seem like an easy way to fund your business, it does come with a few limitations. Similar to government grants that are a part of the Registered Education Savings Plans (RESPs) provided by Canadian Scholarship Trust. These grants are geared toward helping children get a post-secondary education, government business grants have strict qualifications that need to be met in order to reap their benefits. Not only this, but competition for grants is almost always high. Grants can range in value from a few hundred dollars to as high as hundreds of thousands of dollars.
Simply put, bootstrapping means funding your business out of your own pockets. These businesses also re-invest earned revenue from their business ventures in order to grow. Bootstrapping is not a bad option by any means, because it allows entrepreneurs to experiment with their brand freely. Not only this, but by building the financial foundations of your business on your own, you’re also more likely to attract investors if you need funds to grow your business.
Business loans are given by banks to applicants who have a great credit score. Business loans are a low-cost option for established businesses that have already enjoyed their share of success. However, it should be noted that business loans have high qualification standards and they often come in the form of secured loans.
This means that the terms of the loan may require that some personal assets of the borrower will be used as collateral in case the borrower fails to uphold his end of the loan contract.
The need to secure other sources of a reliable income cannot be stressed enough, especially during a pandemic that has uprooted our lives, with no end in sight. This situation coupled with the eventuality of a major post-pandemic recession should already be reason enough to plan ahead.
While it’s understandable that not everyone is comfortable with the idea of starting a business venture, there are few things that are as resilient and as effective a business. After all, we’ve all seen that 9-5 jobs are not as reliable as we initially thought. It’s time we tried something new.