Entrepreneurship is one of the few ways, in today’s economy, that you can create financial security for yourself. There are no guarantees in business, of course, and 50 percent of small businesses fail in the first year.

But if your business fails, you can start a new one. The fact is, you’re reliant upon yourself, and not a corporation or a boss, for your income. That can be both empowering and scary. Here are five ways to get capital for your start-up business without accruing credit card debt.

1. Kabbage

An offer advertised on Paypal piqued my interest enough to investigate further. I was surprised to learn the company has been around since 2009 and has an experienced executive team with backgrounds in business and finance. The firm is backed by venture capitalists and, to date, has raised more than $56 million to help fund online businesses.

It’s not easy to get funded by Kabbage; you’ll need to show a solid track record of revenue from online sales. Rather than looking at your existing credit record, though, Kabbage looks at data generated through online sales, shipping, Paypal accounts and other sources to determine your company’s creditworthiness. You could get between $500 and $50,000 to hire employees, increase your inventory, market your business or any other business expenses.



Business owners receive the money through Kabbage Advances, which carry less risk (and lower interest rates) than a business credit card or a loan. The monthly cost ranges from 2 to 7 percent of the original Advance amount. The cost is assessed when the advance is first taken, and again if the entire Advance amount is not returned after 30 days. Every 30 days, the Advance is re-assessed at a rate of 1 percent, until its fully satisfied. This is especially good considering that Kabbage covers the Paypal fees for transfers, too.

Fun fact: The word “cabbage” is slang for “paper money.” The founders thought changing the spelling to Kabbage was just kool, er, cool.

2. Kickstarter and Other Crowdfunding Sites

Kickstarter is the largest and one of the most popular crowdfunding sites, but there are many others like it. With “crowdfunding,” if you have a project idea, a new product you want to bring to market, a film, a book, an art project or any number of other projects, you can ask for money to get it “kickstarted.” Typically, the creatives who are asking for funding offer something to the investors; everything from a public dedication to free products and more. Kickstarter recommends that rewards equal $20 or more to increase your chances at getting full funding.

The money isn’t free. Not only do you have to provide rewards to those who fund you, but you have to put in the time and marketing to make it work. This post http://99u.com/articles/7143/kicking-ass-taking-donations-9-tips-on-funding-your-kickstarter-project by Todd Anderson recommends that Kickstarter participants “fundraise like it’s a full-time job.” Over six weeks, one Kickstarter participant looking for $125,000 in funding put in 345 over six weeks, or an average of eight hours a day.

Also, it’s important to note that if you don’t achieve your funding goal, all the money is refunded to your investors and you don’t receive anything for your efforts. But, 44 percent of Kickstarter projects, to date, have reached their goal.

If you do succeed, your small business project will have the cash infusion it needs to reach completion.

3. Peer-to-peer Lending

Peer-to-peer lending through sites like Prosper.com and LendingClub.com
provide opportunities to borrow money to pay off debt, start a business, do home improvement projects, buy a house and more.

You’ll need good-to-excellent credit to secure the best rate. Rates may be lower than what you’d get with a credit card or through a bank, and the benefit is you get to bypass “big banks” in favor of a more personal process. As with crowdfunding, peers (typically friends, fans of your business and other people in your social media networks) become the lenders. It’s an investment for them, as they earn money as you pay back the loan.

I wouldn’t list peer-to-peer lending as the number one way to fund your small business or start-up, but it’s one alternative worth investigating if you want to avoid credit card debt or other conventional loans.

4. Angel investors

Angel investors were hot in the ’90s, when millionaires were looking to invest in the next big tech start-up. Angel investing can be a formal arrangement, where you go through a venture capital/angel investor firm, or it can be as simple as finding someone with disposable income who believes in your business idea. (So, yes, if your rich uncle loans you money to start your eBay business, you could consider that angel investing if he’s earning interest as you re-pay the loan.)

It’s not as easy to secure angel investments today (unless you have that wealthy uncle), but with a clear business plan that shows a knowledge of your market and your true potential for profit, it can be done.

Entrepreneur Dreams Do Come True

If you think you have the next great business idea, the only way you’ll find out is to launch your business with a clear plan and let the public decide. There are ways to launch a business on a shoestring budget, without re-financing your home or charging up your credit cards. All it takes is a clear business plan, marketing savvy, and passion. The right connections help, but you can build those if you’re willing to put in the time and share your passion with the world.

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