Starting business free of debt will minimize your risk and give you a much better chance of succeeding. There are a number of funding opportunities you can use to do this. Here are some debt free funding possibilities:

Minimize start up costs

Some types of businesses demand little upfront capital to get things going, while others require more funding in the initial stages, but less ongoing costs. The business that’s right for you will depend on your financial situation and plans for the future.

If your ambition is to own your own business and generate a comfortable income, say within three years, you want to launch a business that avoids or minimizes the need for debt.

A service-oriented business, that incurs limited upfront costs, may be ideal. Your primary investment in a service business is your time and talent, not dollars.

On the other hand, if you wish to build a business that eventually earns income not tied directly to how many hours you work, you might consider a product based business. The trade off is that your upfront costs for inventory and infrastructure will be higher, along with the continuing cost of maintaining the inventory levels.

There are exceptions though such as selling information products via the web. The key is to be creative and consider all your options.

Outsourcing saves time and money

Creative debt free funding opportunities can include outsourcing certain tasks. During the early stages of starting your business, it’s important to recognize that you can’t do everything yourself. If you’re an accountant launching a bookkeeping business, your skills are in numbers and analysis, not logo design and marketing.

This doesn’t mean you need to hire more staff – on the contrary, you’re trying to minimize your start up capital needs. However, you can outsource smaller tasks to consultants and industry professionals on a job-by-job basis. This gives you the opportunity to cut back on expenses and reduce the need for space, staffing, equipment and so forth.

For example, many virtual secretarial services exist to assist small business owners. One receptionist might work for five or six businesses at time, with a different phone line and answering service for each business. The service allows you to deliver the perception that you have a fully-staffed office with a permanent receptionist – while your expenses are a third or less of what a full-time staff member would cost.

Start slowly, start smart

Another way to creatively approach business funding is to begin slowly. You can save on expenses with a staggered or part-time start up.

You can break your new business into separate segments or product offerings, take them one at a time. By limiting what you do to start out, you may find you limit your need for traditional sources of small business financing.

Another starting slowly option is to go at it part-time, not giving up your day job until you’re confident you’ll make it.

If you decide to launch your bookkeeping service, for instance, start by approaching friends, colleagues and relatives for referrals. Build a small base of clients to work with in addition to your full-time job. Then, once you have developed a reasonable client base, you could cut back to part-time at your day job, until you finally quit and make your business your full-time career.

The slow road might take a number of months, but staggering your start-up this way will avoid the need to take on new debt to get your business up and running. A safe alternative for your business start up funding.

Let’s make a deal

Along these same lines, you could also approach your current employer – or a potential large-scale customer – about contracting for them. Your boss may be willing to spin off a segment of his business to you, and buy back your services. Now that’s a creative approach to business start up funding!

If you’re currently working in marketing, and you wish you launch your own freelance marketing and PR business, you could strike up a deal with your employer to use some of their facilities during the start up phase. They could contract with you for services and have the convenience of you being on site. It’s often a win-win for both parties as the employer saves the usual costs of having an employee on board.

Similarly, a new client might be willing to enter a similar arrangement, and allow you to work out of their office one or two days a week. Once you get the word out to contacts and colleagues that you’re planning your new venture, you’ll be surprised at the number of leads you can generate.

A novel approach – Save for it

There is another way you can deal with your start up costs: put simply, start a savings plan now. Rather than following the modern methodology of “do it now, pay later”, spend 12 months saving as much money as possible. This will help you with part or all of your business start up funding.

Your retirement dollars to the rescue

There are also creative business funding options available through your retirement plan. Moving money into a self directed IRA is a way to take money from retirement funds tax free to start a business. Be sure to consult with a qualified professional before attempting this.

Another option is to take some money out of your retirement fund in a taxable transaction. There are many issues to consider, but then again, how are those retirement savings doing right now anyway? The new business venture may become your new best “retirement fund.” You will build value that you can cash in on when you sell the business down the road.


These are just a few of the alternatives to going into debt. There are many more if you’re willing to look. Avoid the shackles of debt slavery and find real freedom in starting business debt free.

Be creative in looking for other funding opportunities. We provide help through our coaching and consulting programs for small business owners looking to do it right.

by Steven Schlagel – May 22, 2009