This story is part of a series about financial literacy for small businesses in the Ypsilanti area. It is made possible by University Bank.
When it comes to starting a business, going to a bank to front the initial costs might seem an obvious solution. However, not everyone wants to borrow – and many in Washtenaw County simply can't. Luckily, local experts say that not being able to "break the bank" won’t necessarily make or break your business.
"Everybody thinks they need money upfront to be successful, and it's just the opposite," says Lysa Davis, an Ypsi- and Detroit-based financial coach known as
"The Trusted Banker."
It's a financial literacy secret that Davis, who comes from a long line of entrepreneurs, shares with her clients who come to her for advice on how to become "more bankable."
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courtesy Lysa DavisLysa Davis.
"Whether or not you get your business off the ground has nothing to do with a bank loan," she says. "It has everything to do with you and your product. You don't need a bank until you're ready to grow."
Mark Smith, owner of
Michigan Innovation Headquarters (MI-HQ), expresses similar sentiments. His company, which has locations in Ann Arbor and Ypsilanti, helps emerging technology companies by providing affordable space.
"Getting customer validation makes a company a lot more investable. It shows that you've done your work," he says. "Once you do that, you make yourself more attractive to banks, and places like [Ann Arbor]
SPARK are going to be more interested in helping you."
Smith says there are plentiful local resources and pathways to funding a business, and with help, navigating them is easier.
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Doug CoombeMI-HQ owner Mark Smith.
"A lot of times banks want your personal guarantee, or your firstborn child, or all of the above," he says. "So you need to think of all the financial tools that are available that you can get a hold of."
His own company is a case in point. He explains that MI-HQ staff work with company owners to gain more financial know-how via entrepreneurs, mentors, and residents in their wide investing network. In some cases, they're able to provide a little bit of seed capital, putting clients "on a 90-day or 120-day sprint" to see how well they perform.
"This type of support is how we can transform neighborhoods and communities," Smith says. "My hope is to stand up a lot of people who have ideas for business and just need that helping hand to get organized and going."
Non-traditional funding options
There are definitely challenges to starting a business without relying on banks, but they're not insurmountable, says Kristine Nash-Wong, director of entrepreneurial services at Ann Arbor SPARK East. She points to her organization's website as a starting point. Among the offerings is a user-friendly
list of microloans. Looking into these types of short-term business loans, she says, is important when more traditional financing isn't an option.
"They're more small business-friendly. Programs like the Small Business Association program have some government backing, so it makes it a little bit easier for the banks to give those loans," she says. "Some of the other programs, like the
Michigan Women Forward program, offer a microloan alongside a matching grant component."
Nash-Wong adds that different financial resources may be available at each step of starting a business. She advises connecting with the
Small Business Association of Michigan, or the
Entrepreneurship Center at Washtenaw Community College, for guidance. With support from the Michigan Economic Development Corporation, her organization has also recently launched
mismallbusiness.org. The program supports small businesses in Washtenaw, Monroe, and Livingston counties with free business consulting.
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courtesy Ann Arbor SPARKAnn Arbor SPARK East Director of Entrepreneurial Services Kristine Nash-Wong.
"Working with a business consultant helps folks figure out a lot of important things," Nash-Wong says. "Like, how much would you really need for investment? And when would you need it? Is there a way to grow organically so that you're really self-funding through revenue?"
Duane Pittman, CEO and founder of
Vector Business Consulting in Ann Arbor, underscores the value of active support from community resources such as SPARK. His company focuses on government consulting, helping businesses navigate federal procurement. The 71-year-old self-described "serial entrepreneur" was a 2023 participant in Washtenaw County's
Advance Your Business program, which he says has afforded him more financial business clout.
"I'm a seasoned business owner, and I've learned even more about the things that I already knew, as well as some things that I didn't know," he says. "What was important is that [SPARK has] been not just a resource, but an active partner."
Pittman's own advice to his clients and others seeking funding for their companies is to think outside the box. He's grateful that today he "never worries about finances," but that wasn't the case when he started his first business in the early '70s.
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Doug CoombeVector Business Consulting CEO and founder Duane Pittman.
"Banks were not considering ... Blacks of any age. I had gone to the banks and they told me 'no,'" he says. "So I had to really think about how I was going to finance my endeavors."
He shares that when he got his first job contract in the '70s, he didn't have any money to buy the tools he needed to do the work. Pittman summoned his courage, took a hard copy of his work contract to a supplier, and convinced the owner to give him the tools he needed. He promised the supplier that once he was done, he would get paid, and that he would return with the money for the tools.
"I essentially financed my first contract through my vendor," he says. "So my advice to people who can't get bank loans is to be open to being creative."
Creativity is key
Washtenaw County Economic Opportunity Manager Cheranissa Williams also emphasizes the importance of creativity alongside resilience and community networking. Williams herself is a small business owner. She's a certified life coach and has helped over 500 people start small businesses.
"There are a lot of non-traditional ways that people don't think about that could fund their business if they're willing to fund it in pieces," she says. "If you don't want to take out a loan, if you don't qualify for a loan, that doesn't mean you can't start your business. You've just got to be smarter about how you actually get the funding to launch."
She uses an example from her own experience.
"We would sell dinners. And so whether it was a church fundraiser for a new roof, or whether it was for someone's first semester tuition, we would generate revenue that way," she says. "Those types of funding ideas could still work well."
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Ronsher BrooksCheranissa Williams.
Williams says taking money from a 401(k) or asking friends and family to front capital is also an alternative for those who have been denied a loan or who don't want to owe a bank.
Ypsilanti-based small business owner Julie Palmer, a seasoned event planner, agrees with Williams wholeheartedly. She launched her dream business, JEM Events, in 2016, partially funded by family inheritances. She's had some challenges, including a nearly 100% drop in business during COVID-19, and even had wondered briefly if she might have to drop her dream. Instead, she started seeking advice and support.
Palmer adapted by creating online events and securing a $2,500 grant from Comcast. The grant also came with more computers than she actually needed, so she sold one of them and then invested the money back into her business.
"I've thought about getting a bank loan, but I've never been confident that I'd be approved, and I also don't want to take on debt," she says. "Instead I'll continue getting out there and networking with others in the community."
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Doug CoombeJulie Palmer.
Williams says that approach can be truly impactful.
"I think the creativity that we possess helps us take a hold of our own destinies and not leave it in the hands of a bank," she says. "It's about resilience and using your creativity to solve your problems."
Williams gives the example of starting a cupcake company with only $5,000. She explains that an entrepreneur could take that $5,000, rent a commercial kitchen, work on packaging, and find people to work with until their revenue hits $20,000. That might take them eight months, but then they might see an old ice cream truck for $10,000 and fix it up. Now they have a dessert truck that can be used at wedding venues – or even customer appreciation events at their local bank.
"Each step of that is creativity, and it's also your power to be able to fund your business without the debt from other places," Williams says. "Yes, it takes a little bit longer, but you now own it 100% and have relied on yourself for fulfilling your dream, because it really is your dream that you're funding."
Jaishree Drepaul is a writer and editor based in Ann Arbor, she can be reached at jaishreeedit@gmail.com.
All photos by Doug Coombe.