Alternatives to Loans

Wednesday, November 29, 2006

A lot of budding entrepreneurs are afraid of taking out loans that they have to personally guarantee. Though this is the most viable method to starting your business, there are a few alternatives that I would like to mention. There is always a problem of generating momentum without proper financing though. Since putting your name on the loan signifies commitment and trust on your part, it goes a long way towards building trust and excitement about the coffee shop in others.

One way of building capital for your coffee establishment without pulling out a massive loan is by using shared ownership. For instance, you may not be able to put down $20,000 to get the business off the ground, and either do not have the credit or unwilling to use it to get a loan. You have the alternative of giving away ownership to a group of say 20 people who are interested in each putting down $1,000. With coffee houses, you may even be able to get away with something a little less investor oriented. Think something like a country club, but for coffee shop goers. The ownership could give rights to sponsor and vote on who to bring in for entertainment, or anything like that.

Another option would be to lead the creation of a coffee shop ran by a club or organization. You could create a student ran coffee shop, church ran, or some other entity. Often times coffee shops of this nature would be more likely to get donations to help the startup, or even cheaper space. There is also the chance that the organization that the coffee shop will be operated in the name of will have a place where the coffee house can be.

Remember, that these are just rough ideas on how you can get funding for your coffee startup with more creative ways than just getting a loan. Though some of these ways will give you compromised ownership and authority over the direction of the place, they can be options. These ideas will probably also take longer to get your coffee shop rolling with than traditional loans as it will take a while to convince people of your idea. It is a good idea to consider all the options as you are working on your coffee shop startup.