Creative Financing| A True No Interest Loan.

by J.Crawford on November 25, 2008

I’ve decided to update this post on creative financing which has been one of the most popular post on small business financing and no interest loans.  While no interest loans to start a business rarely exist outside the scope of your friends and family, my point with this article was to share ideas to fund a  small business start up that are more on the creative side than the traditional side.  Don’t take what I’m saying as advice, because it isn’t. I’m willing to share my opinion, at the same time I know and accept from experience that every business funding issue is different and every business is different. Make your own call, it’s your business.

Creative Business Financing

There are many creative business financing ideas and I’ll talk about them in 2 separate parts.  Probably the most popular time entrepreneurs are looking for business financing is in the start up phase. The second part I’ll share ideas about funding a small business so it can grow,  and meet its obligations, which essentially is the other time entrepreneurs are the most hungry for cash.  Occasionally there are “emergencies” in the life of even the most successful small business, most of the emergencies are really just cash flow problems, but none the less when you need cash you need cash.  There are several situations that a creative financing approach with work better than getting a loan, even if it is a no interest loan.  In my experience most cash-flow issues are in some way attached to growth whether it is intended or not.

I’m currently working on a site that will share information on types of loans both secured and unsecured and how to use them to start and grow your small business.  But for now let’s just put loans on the shelf and think more about solving cash-flow problems and small business funding challenges from a different perspective.

Creative Financing for Start Up Funding

Ok your going to start a business and you need some start up capital.  Some call this seed money and it all depends on what kind of business you are going to start.  I’ve owned a several different businesses and own and run a few today.  Of  the most cash hungry businesses that I’ve owned was a commercial construction company that focused on concrete construction. I was 21 when I started that company, I did it without any start up capital. How did I do it?

The very first job I did was for a neighbor and this is how it worked.  He knew I worked in the trades and I knew about concrete so he asked if I wanted to install the floor in his new garage.  I had never done a job for someone before so I said sure, but I haven’t done many jobs so how about if I just help you and you can just pay me $200 bucks?  He agreed to it.  I actually rented a bull float (concrete tool) from the batch plant (people who make concrete).  the Customer wrote the check for the materials. So the job got to happen without me using any of my own money at all. This is one example of how to use creative financing to start a business.  When I look back this was the start of that business.

So $200 was the start up money I got for my new business.  I got it by trading value for money.  So when the job was done I went out and bought the tools I need to do the work, $200 bucks bought most of the hand tools I needed and when I needed a power trowel or skid steer, I would just rent one. Granted this wasn’t a resturant or a hotel or a fitness center, but it was a business and it’s a great story about how it actually does work to start a business using creative financing techniques.  In this case I was able to use my customers money instead of a bank.  Had I went out and gotten a “no interest loan” I probably would have failed quickly in that company.  By the way 2 years after I poured that garage floor the company I started did over 2.5 million dollars in revenue, employed over 35 people, and taught me a ton about business and solving problems in a creative way. There were plenty to solve.

Createive Financing to FUND a Small Business

Remember how I said that company really took off?  Well if you own your own business or even understand how business work you know that the first story about the $200 bucks and the garage floor is a whole different animal than running a business that does over $2,5000,000.00 a year and has 35 employees.  Sometimes payroll would be over $15k a week and it wasn’t always easy to make payroll.

During this time in my life I heard and came to realise the value of this statement: “Cash is King”

It doesn’t matter if a project or business model or deal has  profit margin of 2000%, if you don’t have the working capital to execute your screwed.  Here is another way to help understand the difference between financing a start up and funding an existing business.

Let’s, for sake of the point, say that financing a start up is like buying a ticket on a train.  Funding that business and its cash-flow needs is like running on the tracks in front of the train and the only thing that separates you from certain demize, is CASH! Exciting huh?

Keeping your business funding properly takes some creativity and it is crucial that you meet the challeges your small business presents in the funding department.  One of the best ways to fund your business better is to look at your cash-flow model.  Many times you can tweak the way you do business and it can have a big impact on cash.  Lets go back to the concrete example:  Traditionally in the residential industry of that business we could ask for 50% of the project total cost up front.  The cost of material was usually about 40% and direct labor cost were around 25%.  There were other expenses and overhead but the business had about a 24% profit margin, which is one of the reasons I no longer run that business.  I noticed after about 2 years, that I was always late on paying my material bills and many times it was a mess trying to make payroll on fridays.  So I started to offer customers 5% discounts if they paid in full up front, not all did this but it helped a ton.  I also started to require 70% down and the balance when the project was done.  Doing this made it so I could pay my bills on time and it saved a lot of stress.

Another creative way to create more cash in your business is to develop new revenue streams from existing clients or customers.  My online business is better example of how to create more money to fund your business.   I have serveral niche sites that make money each month and it always bothered my that I relied almost exclusively on one income source.  Around the same time I started to build a house and needed to pull in more income.   I used the need to motivate me to look for other ways to make money and create more reveneu.  By testing other methods of monetization I was able to make a significant amount more money by affiliate marketing and selling private advertising.  I also did some consulting. Not a lot but it made a couple thousand dollars.

Getting Loans to Finance a Small Business

There are several creative loans for small business owners some of which actually are a no interest loan provide you play by the rules.  In our town the credit union and the bank would over a line of credit that was accessible but carried no fees unless you actually borrowed the money and didn’t repay it within 60 days.  I think this a good no interest funding idea for emergencies, but it really isn’t a fix.  Look at your business model or even think about changing industries if you constantly need to borrow cash to finance your business.  Obviously if you are growing and adding more stores or locations, that is different.

I have also borrowed money (a lot) from individuals for different projects and business challenges. I’ve never really done bank loans?  It seemed like when I needed the money they didn’t want to lend it and when I didn’t need the money they were knocking on my door, so it never really worked out.  I have borrowed several hundred thousand dollars, probably over 500k if I added it all up.  Some of the individuals I borrowed from would give me small 60 day no interest loans.  If they had to get money out of a money market account or a 401k or some other retirement type vehichle they would require I cover any fees (which were low) and I had to pay interest.  I didn’t do a percentage I just offered them a lump sum.  I would usually involve them in the project, show them why I needed the money and address any concerns they might have.

Creative financing for small business can easily fall by the wayside when access to funds is open and easy. Many people who are looking to start a small business are also looking for small business financing and loan ideas or other ways to fund the start up, to no avail.  Finding an affordable small business loan outlet can be difficult in today’s economy. So What can you do about it and is there really a “no interest loan“?

No Interest Loans

Getting creative with small business financing can provide you with a true no interest loan that isn’t a loan at all.  Remember you don’t have to pay back what you create and there are many opportunities to get more money out of your business whether it be improving cash-flow, creating other revenue streams, or maybe even charging more. Many good business ideas can be funded without the use of traditional borrowing channels. Many business loan ideas can seed themselves if the business plan is put together correctly. Obtaining an unsecured small business loans can be very difficult especially for start ups.  Get some business going first and you’ll have a better chance of enjoying success.

Alternative Financing & Interest Free Loans….

Creative Ways to Finance a Small Business.

Some avenues for creative financing idea might be more along the lines of a joint venture. Before you run off, a joint venture is different than a partnership, you would not be sharing ownership if it was important not to. A joint venture as a creative way to finance a small business is smart for a couple reasons. First off you JV partner could also be a source of new business. Another thing to keep in mind is the fact that a joint venture with an entrepreneur close to you niche but not in it, could really make a difference in you business becoming profitable quickly. Think about it.

250k Small Business Loan

Before you run out and get a small business loan for 250k, think of alternative financing for small business start ups. Bartering is not a new idea, but bartering options provide a great way to be more creative with small business loans and start up capital.

Lack of Capital.

Most small businesses fail because they are under capitalised. Getting a loan is not the answer. Providing a small business with the capital it needs to survive is done through good cash flow management. This is accomplished with a solid business model, not a big fat loan…

{ 3 trackbacks }

Why the Best Small Businesses to Start Are Home Based « Corpus Christi Small Business
February 8, 2010 at 4:11 pm
Best Small Business Resources to Start a Successful Home Biz
February 16, 2010 at 2:52 pm
Succesful Funding Ideas: Small Biz Grants-Loans & Cash Flow
February 25, 2010 at 2:59 pm


admin November 17, 2009 at 6:53 pm

Thanks Richard for the kind words. Cash flow is important and the “if only I had” mentality is crippling isn’t it.

Thanks for contributing here at Create Liberty. We subscribe to the dual path approach to success, its about you first and your personal development, and then your business. It does take both. Right thinking proceeds right action.

Richard November 10, 2009 at 7:42 am

These are extremely good suggestions for those starting a business. Many people think “if i only had more money…”, but as you say more often good cash flow management is key!
.-= Richard´s last blog ..How To Get A Small Business Loan =-.

Sahra isse January 30, 2009 at 12:56 pm

My sister and I are trying to start a small business. However we lak the founding to strat the business and we would like to get a loan with no Interest. If you can help us with that, that would be wonderful. The amount we are thinking about is around 10,000 and i like the idea of the joint venture as long as the join is not fourever.

Comments on this entry are closed.

Previous post:

Next post: