I'm wondering if any of you have started your business without getting a loan? And tips or advice if you have would be appreciated. Thank you.

As long as you have money of your own, of course, it would be a simple task to own a shop.

Yes, you have to have capital coming from somewhere to have a shop, whether it be a loan or your own personal finances. Do you have money saved up?

I do have money saved up, but I'm not sure if its nearly enough to start up. I'm researching how to put together a business plan now. Hopefully then I have a better idea of what my start up costs would be.

If you wanted to start slowly you could rent an existing commercial kitchen instead of a retail storefront (offering deliveries or customers picking up by appointment), that would greatly reduce your startup costs. Many areas in the US have kitchen rentals or incubator facilities that already conform to health dept rules, not sure how things work in Germany though.

My business is still in-the-making right now but I haven't taken out any loans. I have invested about $1500 so far though in equipment/supplies/filing fees and classes. I still have a bit to go but it should be under $2,500 total. I'm home-based and have not made any changes to my current residential/home kitchen.

Marry a doctor... that's how I did it. Actually, I saved the money for about two years and then told him my plan. I had all of the money to start and to buy the bigger equipment. I already had all of the small equipment. He then added to what I saved and built me a great commercial kitchen. During the time I was saving and planning, I didn't even add a song on my iPod. I worked hard at putting the plan together. I knew he would help me but I wanted to do it on my own. His contributions were a new restroom (vs. the small old one), an additional double oven, and workers to make floorplan and mechanical changes vs. working with the space as it was (such as moving the hot water heater). Mainly what he added were changes that would benefit the house when we sell it. It can stay a commercial kitchen or we can remove the equipment and the living space would be a full apartment or mother-in-law's siute.

Even if he had not helped me, the bakery would have been completely debt free. We did already own the property and the space was finished living space before we renovated it. We also both have contractor's licenses which allowed us to pull our own permits and bypass some inspections.

I have owned two start-up businesses prior to my marriage, so my small business experience helped. Starting a business in this economy with a loan or not enough capital to keep it going would have been a tough road. There are reasons 85% of small businesses fail in the first year, and the above two are at the top, along with lack of experience.

I have always been a firm believer that if you have to get a loan to start your business you just cut your ability to profit/succeed in half. It's like digging a hole and starting off from the bottom of that hole. The larger the loan the bigger the hole, the larger the percentage rate the bigger the hole, which equates to it taking longer to break even if you can ever break even at all.

You would do better to try and find a silent business partner/angel investor who takes an equal amount or a percentage of the liabilities along side you.

Thanks for all the advice! I really appreciate it. I am in Germany now and will be for the next year, but I will be opening stateside. I wouldnt even know where to start opening a business in Germany!! I think what I have saved is a good start, but like I said, I won't know exactly until I complete a business plan. Where do you recommend finding silent business parters/angel investors?

I am in the process of starting a small bakery and hope to have it open in 12-18 months. I don't have alot of capital so I am buying equipment slowly each month. I am also getting all of my suppliers in order to ensure I am keeping my expenses low. In regards to space, I will first rent a commercial kitchen from a local church. I hope to build up my customer base first by making birthday cakes and pastries and of course using cake boss to keep track of my customers. Planning also makes my birthday, mothers day and Christmas easier on my family and friends because now they know what to buy me...SUPPLIES. I don't want to take out any loans but just in case I need to, I'm also getting my debt to ratio in order and preparing a business plan.

I also recommend learning as much as possible about german pastries, brotchen,and cakes. I lived in germany for five years and you'll be surprised how many people have been stationed in germany and absolutely LOVE and MISS brotchen.

Good luck to you and message me if you need any help or advice.

Here is some more information that might help people decide between debt and equity financing.
http://www.nfib.com/business-resources/business-resources-item?cmsid=50036

Equity financing is quite common for businesses that require significant up-front investment before revenue can be realized, especially in my area (Silicon Valley). These businesses would not have been possible with debt financing, unless you can find a creditor who is willing to suspend payments for 1 year, 2 years, or however long it takes to ramp up cash flow.

Of course it is possible to lose control of your company if you give away more than a 50% share -- just as it is possible to take out a loan with crippling interest payments -- but if you are careful equity financing can work for you.

It's also important not to get too emotionally invested in your business. A business is just a vehicle for turning raw materials into finished goods and services that are sold at a profit. If you find that your business has started running your life (instead of you running your business) it might be time to take a step back and reevaluate the situation.

@Linda:
Whoa, calm down. My post was general advice -- mostly for the OP -- and not meant to address any other specific points. That's why I wasn't quoting anyone.

There's no right or wrong answer here. Debt financing works for some people, equity financing for others, and in many cases both can be used. If you don't feel comfortable with equity financing there's absolutely nothing wrong with that.

I just happend to see a story on peer-to-peer loans this evening on my local news. I though of this thread by @sarahsweetcakes. Here's the link:

http://abclocal.go.com/kgo/story?section=news/7_on_your_side&id=8248928

It showcased lending practices where instead of getting a loan from a bank, you can get a loan from private investors. I didn't look into it but it sounded a little like what Jason was taking about a bit earlier in the thread. Two companies they mention are Lending Club & Prosper.

Also, look into getting a grant through your city or county. I know that my city offers small businesses grant money to start up within city limits. They may come with certain restrictions but it's always worth a shot.

Good luck!

I'm going to agree with Linda on point of view. Jason is correct on his options, and that may be the right course for some people. But, in this economy and considering that this is an industry that is creeping toward saturation, I am glad that I saved the money and opened with the lowest overhead possible. I had to wait two years to save the money. But if I had to start over tomorrow, I could do it again so easily on very little money and almost right away with the knowledge I gained in that time.

Remember that when you get a loan, have to secure collateral, or have secured financial ties to someone, you may lose your home, credit rating, and future income. And keep in mind that businesses that start to have trouble usually look to the one source of readily available cash, the IRS. The intention is to make it up later, but in many cases, later never gets here. The person or institution who loaned the money will not have liability. It will be yours.

Just think about these worst case scenarios before you take the plunge. Starting debt free will go a long way in keeping away the wolves if things get tough.

A retail shop in our area (they will sell baked goods and other snack products) has come up with another interesting financing scheme...in exchange for an up-front investment from an individual they are providing free product for a specific amount of time. I don't know how successful it will be (the business hasn't opened yet) but I thought it was a creative solution.

@scp: I absolutely agree that starting debt-free is the best way to go, and if you have the money saved that would be ideal. But if you don't have the money to start up and you have a promising business plan, sharing ownership of your company with investors is another path that is potentially a lower risk than taking on debt, with the caveat of a lower reward of course.

Thanks so much everyone, you are so helpful!! Any recommendations on a website where I can find help to write a business plan? I'll be sure to keep you all updated on my progress!

we sold a paid off single family rental home we owned and got 100k cash out of it and opened ours, debt free. Thats why i bought rental homes 20 yrs ago, just for options like this..................and early retirement, when i retire in 5 yrs