Do you have a business idea but no funds to execute your vision? Starting a business without seed money can be difficult, but it's not impossible. Keep on reading to hear how.
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So, you want to start a business, but you’re short on funds or have bad credit. This isn’t as much of a problem as you might think.
We’re here to show you the best way to start a business with no money. Whether you want to know more about the best small business loans, or just what options are available to you, we’ve got you covered!
How To Start A Business With No Money
There are many ways you can start a business even if your credit history isn’t great or you don’t have much money saved up.
Here are the steps you need to take to start a business with no money:
Pick A Free Business Idea
Some of the most popular business ideas for entrepreneurs who want to start a business with no money include:
- Service-based businesses (house cleaning, virtual assistant work, freelancing, etc.)
- Dropshipping
- Print-on-demand
- Handcrafted goods
- Digital products
- Social media influencing
- Affiliate marketing
- eBay (or other platform) reselling
Most of these are side hustles or side job ideas that can be done from home or in your free time.
Recommended: How To Start A Side Hustle: The Complete Guide To Setting Up and Running A Side Business Successfully
Business Finance Options
Financing Option |
Best For Business Owners… |
Business Loan |
With great credit scores, solid collateral, and meet traditional lenders’ strict borrowing requirements. |
Personal Loan For Business |
Who can’t get a traditional small business loan, haven’t made any sales, don’t have a good business credit score, and can be personally liable for the loan. |
SBA Loans |
Who need large loan amounts, low-interest rates, have the time to complete the lengthy application process, and are able to wait several weeks or more for fund distribution. |
Grants |
Who want free money, have the time and energy to dedicate to lengthy application processes, and meet extensive qualifications. |
Business Lines Of Credit |
Who need flexible funding, can’t offer collateral, and want a revolving funding source. |
Equipment Loans |
With equipment needs who want competitive rates, long repayment terms, and can afford a down payment. |
Small Business Loans
There are generally 12 types of business loans that you’ll encounter as a new business owner. Here are some commonly asked questions about them:
How Much Of A Business Loan Can I Afford?
Before you decide to take on a loan, there is one important question you need to ask yourself: Can I afford a business loan?
As the cliche goes, don’t count your chickens before they hatch. The last thing you want to do is take out a large loan with a high-interest rate and go further into debt because you can’t make the payments. That’s the quickest way to end your small business journey.
How Do I Get A Small Business Loan?
If you’ve done some number crunching, stashed away some emergency money, or are relatively certain you’ll be able to make a decent profit in your first month of selling, you might decide you’re ready to try for a business loan.
In that case, it’s important to do your research into how to get a small business loan so you aren’t walking into the process without the knowledge you need to be successful.
Can I Take Out A Personal Loan For Business?
If the idea of a business loan stops you in your tracks (or you don’t qualify for one after applying) taking out a personal loan to start a brand-new business is fairly common.
The best personal loans for business have competitive rates and terms, provide ample funding, and can be used for a variety of expenses.
What Are SBA Loans?
After COVID-19 shutdowns and the scramble for emergency small business funding, Small Business Administration (SBA) loans became more popular.
It will take a long time for you to learn everything you need to know about SBA loans, but it will be worth it. These loans are low-interest, long-term loans with better terms than you’ll be able to find almost anywhere else.
The SBA offers the following forms of loans/special funding:
- 7(a) Loans: Flexible loans that can be used for many purposes like working capital, equipment, and real estate.
- Microloans: Small loans up to $50,000 that can be used for working capital, inventory, equipment, and other expenses.
- 504 Loans: Large loans that can be used to acquire or update fixed assets like real estate.
- Disaster Loans: Loans used to rebuild or maintain a business following a disaster.
Small Business Grants
These are the unicorns of the business startup funding world. As the closest thing to free money you can find, grants are highly competitive, time-consuming to apply for, and not a guaranteed source of funding for your new business.
What Kind Of Grants Are There?
Small business grants come in all shapes and sizes. They’re usually intended for a specific industry or type of business owner. Some examples include:
Who Qualifies For A Grant?
Organizations that give out grants won’t invest in just any business. They want to ensure your business deserves the funding and will put the money to good use.
Grant organizations want to see that privately owned, for-profit businesses are part of their specific industry and have demonstrated a strong potential for growth.
If your business doesn’t fall under that category, you’ll need to do some more research to figure out if you qualify for a startup grant.
Crowdfunding
Crowdfunding is a volatile way to try and raise enough funds to start your business.
We would recommend an equity crowdfunding site instead of the traditional approach of GoFundMe, Kickstarter, or Patreon.
Make Smart Investments
Start with the basics. Starting with a one-page business plan will help you determine the expenses you’ll have when getting started.
Focus on crucial needs like:
- Inventory/supplies
- Rent/lease for a business space
- Equipment
- Marketing/advertising
- Hiring staff
- Training staff/yourself
This is also the phase when you’ll decide on your business structure, do market research, decide on your financial goals, and network.
How To Start A Business With No Money And Bad Credit
Now, what if you have no funds and a less-than-desirable (or nonexistent) credit history? There are options for you, too!
Improve Your Credit Score
There is a system most lenders use when they’re considering a potential investment. It’s called “The 5 Cs of Credit“.
Lenders look at your:
- Character: Reputation and trustworthiness
- Capacity: Ability to repay the loan
- Capital: Investment in the business
- Collateral: Assets you can offer if you default
- Conditions: The state of the economy and the conditions of the loan you’re seeking
There are plenty of ways you can improve your credit score by focusing on even just one of the above factors. Saving money, paying your bills on time, owning a home or vehicle, all of these seemingly unrelated steps can help.
Understand Your Credit Score
There’s no doubt you’ve seen a commercial or two about free websites that you can use to check your personal and/or business credit score.
But which of these can you trust?
The free credit score services we recommend include:
- Credit Karma
- Discover Credit Scorecard
- WalletHub
- Chase Credit Journey
- Experian
- Credit Sesame
- Dun & Bradstreet
- Nav
No-Credit-Check Loans
Are you on a time crunch or think your personal credit score is beyond repair?
There are no-credit-check business loans you can look into. But, keep in mind, that they are going to be more expensive and riskier for you in the long run than a regular business loan.
The Bottom Line On The Best Way To Start A Business With No Money
Hopefully, you now have some ideas for how you can start your business with no funding. Bad credit can’t stop you from achieving your dreams of starting your own small business, either.
We encourage you to keep researching alternative financing for your small business. Don’t let seemingly impossible obstacles stop your journey. Where there’s a will, there’s a way!
How To Start A Business Without Money: FAQs
Can I get a loan for equipment?
Yes, to receive funding for only equipment (vehicles, heavy machinery, computers, appliances, furniture, etc.) purchases, you can look into equipment loans.
This form of funding comes as an installment loan and sometimes as a non-revolving line of credit.
The best equipment loans and leases have competitive rates, reasonable qualifications, good term lengths, and transparent terms.
Can I use a credit card to start a business?
We wouldn’t recommend using a business credit card alone to start your business.
Once you get started, it’s not a bad idea to get a dedicated credit card to use as a revolving line of credit for everyday expenses and emergencies alike.
The best business credit cards offer great rates for qualified borrowers, rewards programs, signup bonuses, and other benefits.