How to Start a Business With No Money

Written on November 8, 2021
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Despite what conventional wisdom may tell you, having a stockpile of cash on hand is not a prerequisite for starting your own business. Getting a sustainable idea off the ground is more than possible with little to no upfront capital—you just have to know how to unlock financing when you need it.

It’s encouraging to hear that close to three-quarters of businesses surveyed by the National Small Business Association said they were indeed able to secure the business funding they needed. If you’re looking to start your business with no money, take heart in knowing that you can be scrappy without sacrificing quality or compromising your values.

We’ve put together a list of seven viable resources to help you get started.

Step-by-Step Guide for How to Start a Business With No Money

Some businesses need more capital than others to get up and running. Let this guide be your jumping-off point for bringing your business idea to life with limited cash.

1. Look to Service Opportunities

You’ll likely need more upfront funds to launch a product-based business. Between the price of materials, sourcing costs, and research and development expenses, it can be tough to get going without cash flow. Service businesses, however, are altogether different because they rely on a model that requires little (if any) capital.

Whether you’re a freelance graphic designer, marketing consultant, or contracted program developer, all you really need is your laptop and skillset to be in business. Of course, there’s a real difference between being a one-person show and developing a full-fledged business. As your client base grows—and you begin generating a reliable profit stream—you can hire employees, invest more in sales and marketing, and outsource administrative tasks.

In other words, you could create a scalable business as you go. To ease the financial pressure, you might consider keeping your 9-to-5 job and launching your business as a side hustle until you’re ready to take the full leap. Dipping your toes in the water is a good way to prevent burnout. Not sure where to start? Take a hard look at your skills and experience, then ask yourself if there’s a market need that you’re uniquely able to satisfy. Brainstorming your ideal audience and work environment can point you in the right direction.

2. Consider a Startup Incubator

A startup incubator is exactly what the name implies. It’s a place for your developing business to be nurtured and guided through its infancy. These collaborative programs are built to help startups by offering mentoring opportunities, business guidance, training, and sometimes funding. Incubators provide hands-on assistance in getting your new business ready for market. An added bonus is that you’ll likely make valuable connections and expand your network at the same time.

Just keep in mind that no two incubators are alike. Non-profit options are out there, but so are for-profit programs that treat your business as an investment. These startup incubators typically work for an ownership stake in your company. If you’re ok with giving up some equity, the help you receive might be worth it.

3. Explore Loans and Other Financing Options

Not keen on sacrificing equity? Here are some investor-free options for how to start a business with no money.

  • SBA Microloans: This program, backed by the US Small Business Administration, allows qualifying businesses to borrow anywhere from $500 to $50,000. Term rates cannot go beyond six years, and interest rates typically vary from 8% to 13%. In addition to funding, the SBA also requires its approved lenders to act as small business counselors that provide advice. The one caveat is that the application process for an SBA Microloan can be long and tiresome.
  • Personal Loans for Business: This could be a great option for cash-strapped entrepreneurs who’ve got stellar personal credit. When compared to business loans, personal loans tend to have lower interest rates and less stringent repayment terms. The one downside is that you’re mixing your personal financial health with your business. If your business idea goes south, you’ll be personally responsible for repaying the loan.
  • Loans from Friends or Family: Asking family members or friends for financial help with starting your business isn’t always comfortable, but it certainly has its perks. If they are financially able, they may be willing to provide an interest-free loan with flexible repayment terms. It’s wise to lay out the borrowing terms together as a way of protecting the relationship. Another option is to treat the money as an investment, rather than a loan. This will require an equity trade, but you won’t have to repay the capital.
  • Equipment Financing: This type of financing is specific to businesses that need to purchase equipment to get rolling. At the end of the day, you can’t launch a lawn care business or roofing company without adequate materials to get the job done. Equipment financing uses the equipment itself as collateral, making it easier for business owners to get approved, even if you’re a fairly new company.

4. Spin Funding Out of Lines of Credit

A business line of credit is a revolving account that’s structured somewhat like a credit card. The lender sets up a pool of money that the borrower can tap whenever they like. There’s a cap on how much you can ultimately borrow, but you can draw from it up to that limit for almost any business purpose. An added bonus is that you’re only on the hook for paying interest on funds you use. You’ll also be building your business’s credit history as you go.

One disadvantage is that businesses less than two years old will likely need to meet strict requirements to qualify. Business lines of credit also tend to carry fees, so be sure to read the fine print. One other option is using a home equity line of credit to fund your startup. Interest rates will likely be lower, but it does come with inherent risk. Your home is on the line if you’re unable to repay it.

5. Look into Business Credit Cards

Here’s another situation where you can use your personal credit history to access business financing. A big draw of using business credit cards is that it doesn’t matter if your business is brand new. When all is said and done, a strong personal credit score is all that counts. Some even offer 0% APR introductory periods. Translation: If you pay off your balance within that time, you won’t pay any interest.

There are, of course, some disadvantages. Carrying a balance, especially beyond any promotional intro period, could leave you saddled with interest charges. The bottom line is that it’s another form of debt. As far as your day-to-day business goes, some of your vendors may not accept credit cards, which could present its own set of problems.

6. Tap Outside Investors

Finding the right investors could supercharge your new business’s finances, even if you start your business with no money. Enter venture capitalists and angel investors. The former are typically employees of large venture capital firms that provide funding at multiple stages of a business’s development—and they’re known to have deep pockets.

Angel investors, on the other hand, are private individuals who use their net worth to invest in companies and grow their wealth. They generally get in early and put in less capital than VCs, but they can still be a fantastic resource for new startups.

To land an investment from a venture capitalist or angel investor, you must first convince them that it’ll be worth their while. Having a clear, strong pitch and business plan can go far here. It pays to do your homework before approaching investors.

7. See if You Qualify for a Small Business Grant

In many ways, a small business grant is the ultimate form of funding for cash-starved entrepreneurs in startup mode. It’s essentially free money that never has to be repaid, and it won’t cost you any equity. They can be a little tougher to find, but there are sponsors out there across a variety of industries and niches.

There are currently small business grants up for grabs for women, veterans, minorities, immigrants—and, yes, startups. Think about who you are as a business owner as well as your brand identity and then target grants for which you might be particularly well-suited.

The Bottom Line

Taking a business idea and turning it into a profitable, sustainable operation doesn’t happen overnight. With regard to how to start a business with no money, success is often connected to your ability to think a little differently. Outside funding possibilities are certainly available. A big question to consider is whether or not you’re comfortable trading equity to get more capital. Either way, you’ve got options.