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Some aspiring business owners are thinking twice before taking out loans

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SAN DIEGO, Calif. — After a year of economic hardship, some aspiring business owners say they're thinking twice before taking out loans. In hopes to avoid debt, they're using non-traditional methods to fund their dreams.

Married nearly 25 years, Erik and Geraldine Arreaga are using the crowdfunding platform Kickstarter to bring their comic-book-themed coffee shop to life in downtown San Diego.

“This is not going to be, 'come get your coffee.' This is going to be an experience," said Erik, a freelance comic book illustrator and longtime barista.

A comic fanatic, Erik has attended San Diego Comic-Con since 1991, a tradition broken by the pandemic.

“We only get this convention once a year, and it’s for a week. My attitude for the shop is once the show is over, you can come to our shop and continue that fun," said Erik. “Just in case Comic-Con doesn’t happen, we can still bring a little piece of it to the city.”

When customers walk into Pow Coffee Shop, the couple wants it to feel as if they're walking into a comic book.

“Our shop will have its own characters, and within those characters, they have certain character traits," says Geraldine. "Inclusion, safety, unity, empathy – we brought all of that to our characters so that the community can see themselves reflected within these characters. Make it feel like a welcoming environment and a safe environment. A place for the community to come together.”

Seeking $100,000 on Kickstarter, the community can donate to the couple's dream. If the project is ultimately funded, backers are thanked in return with everything from discount cards to a personal tile in the shop.

"For one, we can see if we can raise it without getting a loan. Second, we actually are getting the word out in general, regardless of if it's funded or not," said Erik.

First-time business owners, the couple says it's a safety net. While they don't anticipate reaching their goal with the current campaign, they'll continue seeking alternative options, keeping supporters updated on their website throughout the process.

“I think you’re going to see more and more of that, even as we come out of the pandemic," said Dan Roccato, clinical professor of finance at the University of San Diego School of Business.

Roccato says nonprofit lenders are also growing in popularity.

“Something like Kiva is a very powerful upstart that is designed to basically lend to small business startups," said Roccato.

Loans are crowdfunded, and borrowers pay the money back over time, interest-free.

"It's designed, really, for those businesses that can't access capital in traditional ways," said Roccato.

Another nonprofit lender, Accessity, supports entrepreneurs of color, women, and immigrant entrepreneurs in Southern California.

“Investors want their money to align with their values more and more. We’re much more aware of that than we were just a generation ago," said Roccato.

But with historic low-interest rates, traditional bank loans could also be the right fit. Roccato says qualified borrowers have easier access to money that’s cheap to borrow.

“It’s really kindling wood for the economy," said Roccato. "The federal reserve is trying to jump-start the economy and create this virtuous cycle where business owners are expanding or starting new enterprises, that sort of thing.”

While Erik and Geraldine may consider a loan down the line, they're hoping enough people will channel their inner nerd and help bring their vision to life.

“We believe in it. It’s a dream that we want to become reality," said Geraldine. "I think nothing at this point can hold us back.”