Q: I have terrible credit and yet it is my dream to start a business. Am I just out of luck? Are there any programs for folks like me? WK

A. For sure it is true that starting a business is one of the true joys in life. Few things beat the exhilaration of launching the business of your dreams and creating the type of career you have always wanted. It is fun and scary and challenging and exciting all rolled into one. But it all depends on one thing:

Money.

It is impossible to live the dream if you can’t fund the dream. Now of course, it is possible to create a startup on a shoestring and people do it all of the time. (In fact, in the most recent edition of my book The Small Business Bible, I wrote a few chapters on shoestring startups in general, and creative financing in particular.)

But starting on ashoestring is not ideal; it is far from ideal. What works, and what gives you the greatest likelihood of success, is launching a business with enough money so that you can do it right. That means being able to pay for rent, marketing, legal assistance, inventory, build-outs, and all the rest.

The question then is, where do you find that capital?These days, in all likelihood, you will patch together the money you need from several different sources, not just one. The most common are your own savings, friends and family, and bank loans. They are all great options.

But what happens when that doesn’t cover everything? Here are a few ideas from my book that can help:

Crowdfunding: Traditionally, people funded businesses either through debt (taking out a loan) or equity (giving up a piece of the pie.) The beauty of crowdfunding through a site like Kickstarter or IndieGoGo (although there are scores of similar sites now) is that you neither take on debt nor give up equity. Instead, with reward-based crowdfunding you essentially pre-sell your product or otherwise give folks some sort of reward for a financial investment in you and your business.

But note: Don’t expect to simply put up a clever video and get $10,000 from strangers. It doesn’t work that way. You need to market the heck out of your crowdfunding campaign. That is what works.

Business plan competitions: These are all the rage. Communities throughout the country want to attract businesses and are doing so by offering cash rewards for great ideas / business plans. Google the name of your city or region and “business plan competition” and see what you find. Five and six figure awards are out there.

Credit cards: Many an entrepreneur has started his or her business using credit cards, for several reasons:

  • Easy access to credit
  • No one required to give loan approval
  • You can use as much or as little credit as you need (or have available)

So yes, when used responsibly, credit cards can be a fantastic option. But you noticed that pesky phrase, “used responsibly.” The secret to using credit cards for your startup is to have a plan from the get-go for how you will pay them back, and then to follow it to the letter.

Microfinance: If you don’t need a lot of money, or your credit history is an issue, check out the microfinance option. The Small Business Administration offers expedited microloans up to $50,000, and much smaller loans are available through Kiva.org and ACCION USA.

Partners: If you are willing to put in the sweat equity, you just may be able to find a partner willing to put up the actual equity.

The bottom line is that there are lots of creative, different ways these days to find the money you need to get started. Good luck.

Today’s tip: When I first started writing about crowdfunding, back in 2010 or so, there were only a couple of crowdfunding sites. Today there are a lot. Crowded-funding may be more like it. But that’s good news for the rest of us. The best listing I have seen recently of the many different crowdfunding sites out there can be found on Wikipedia, here.