How To Start A Business With No Money – Bootstrapping Your Startup

How To Start A Business With No Money – Bootstrapping Your Startup
Amy Fontinelle
on March 31, 2017
Read in 4 min

Wondering how to start a business even though you don’t have a whole lot of money to work with?

Thanks to the wide range of financing options available to entrepreneurs, it’s now possible to start pursuing your dream even if you’re flat broke.

How To Start A Business When You’re Broke

Whether your idea is a new fitness wearable, a salon for special needs children, or an herbal tea farm, there’s a way to fund it.

With various business loans, crowdfunding, P2P lending, bartering and bootstrapping techniques at your fingertips, you don’t need a fat savings account to start a small business.

1. Fund Your Startup with Small Business Loans or Credit Cards

There are many new high-tech options for borrowing money to fund a startup, but traditional loans and credit cards are still very effective.

Startup Loans and Lines of Credit

Conventional loans such as a business line of credit may be secured or unsecured. Terms depend in part on how the loan will be used.

Interest rates can be fixed or variable; minimum loan amounts apply.

SBA Loans

Some loans available from banks are guaranteed by the federal government’s Small Business Administration.

Small business owners can borrow up to $5.5 million, and there are special programs for entrepreneurs starting a business in disadvantaged communities.

SBA loans come in six types and cover a wide range of business purposes, from expanding an export business to financing real estate and machinery.

Online-only lenders make borrowing convenient.

Some also have unique underwriting standards, so you might qualify for an online loan even if you don’t qualify for a bank loan.

RELATED: SBA Loans – The Ultimate Guide to Government Lending

Equipment Financing

Equipment financing can also be a viable option if your business is dependent on equipment purchases.

Small Business Credit Cards

Credit cards can be one of the most expensive options for funding your business due to their open-ended repayment schedule and high interest rates.

The average business credit card’s annual percentage rate is 15.37%, according to the personal finance website ValuePenguin.

Be sure to check out our list of the best business credit cards for options that will give you sign-up bonuses, 0% introductory APRs, and other desirable benefits.

RELATED: An Epic Guide to Business Credit Cards, Charge Cards, & Lines of Credit

2. Startup Funding via Peer-to-Peer Loans

One of the greatest innovations to come out of the fintech movement, peer-to-peer loans are typically funded by numerous investors who each contribute a small amount to a larger loan.

For example, if you borrow $25,000, your loan might be funded by 1,000 investors who each put up $25.

Plus, P2P loan companies streamline the whole process.

All you have to do is make monthly payments to the peer-to-peer lending platform, which then repays the investors’ principal, plus interest.

It all happens online.

Some peer-to-peer lenders only work with established small businesses, but here are options for brand-new ones: 

Look for a P2P lender offering personal loans that you can then put toward your business.

3. How To Start A Business When You’re Broke – Try Crowdfunding

Crowdfunding is another modern marvel changing the face of small business lending as it lets anyone contribute any amount to your business.

Like P2P lending, crowdfunding takes place entirely online.

And the best part? You don’t even have to pay it back.

You will, however, lose some of your contributions to the crowdfunding company’s fees (typically 5%) and third-party payment processing fees (about 3-5%.)

With no prospect for your backers to receive anything (except for the swag promised for various contribution thresholds and the personal satisfaction they get from helping to fund someone’s dream) it’s imperative that you create an extremely compelling campaign.

If you’d like to give crowdfunding your business a shot, here are four options:

  1. Kickstarter funds ideas related to art, comics, crafts, dance, design, fashion, film and video, food, games, journalism, music, photography, publishing, technology, and theater. The catch is that if you don’t meet your entire fundraising goal in 30 days, you get nothing (but you don’t owe fees, either).
  2. Indigogo doesn’t limit you to all-or-nothing fundraising and helps fund a wide range of endeavors, from minimalist handbags to superfood snacks.
  3. GoFundMe helps startups from ice cream makers to image consultants. There are no fundraising deadlines and no penalties for missing your fundraising goal.
  4. Crowdfunder does not work with inception stage companies, but it does work with early-stage startups to help them raise money from a pool of venture capitalists and angel investors.

4. Bootstrap with Lean Startup Principles

Lean startup” might sound like starting your business on the leanest budget possible, but that’s not entirely accurate.

While it’s not a method of funding your business per se, the lean startup process can limit how much funding you need in the startup phase and can get your business generating revenue faster.

The lean startup method involves creating a minimum viable product (MVP) and introducing it to prospective customers to get their feedback, then deciding whether to make modifications or scrap the idea altogether.

The idea is to fail quickly and validate the real market opportunity early on, rather than spending ages creating a business plan around your assumptions and bringing your idea to market after months or years– without knowing whether it will succeed!

Through several rounds of testing your idea with this process, you’ll finally have a product that serves the actual needs of your market.

It takes a lot less money to create an MVP suitable for gathering feedback versus launching a full-blown business blind.

5. Don’t Forget About Bartering 

Trade with others who can provide things your company needs, like web design, blog posts, accounting, marketing, SEO advice, and administrative assistance, in exchange for providing them with your small business’s product or service.

If you can’t find people who need what your business sells, try a barter network to expand your options.  

You may need to negotiate based on how each party values their services. Is one hour of accounting worth one blog post?

One party can include cash in the deal if necessary to even out discrepancies; maybe one hour of accounting is worth one blog post plus $20.

As with any business deal, you should document the final terms in writing.

You won’t be able to succeed on bartering alone— you’ll eventually need to generate cash.

But bartering can help you get started and can even be a way to fund certain ongoing expenses.

Be aware that the IRS considers the value of property or services you receive through barter to be taxable income.

You may be able to take a business expense tax deduction for the bartered goods or services you provide, but the rules are complicated and may require an accountant’s help to decipher.

How To Start A Business With No Money – It Can Be Done

A lack of money doesn’t have to stop you from starting your company.

The vibrant US economy offers many funding options to entrepreneurs, from peer-to-peer loans to bartering to bank loans.

Before you know it, you’ll have the satisfaction of starting your own business and controlling your financial future–

And that’s priceless.

See Business Lenders
Amy Fontinelle Finance Journalist

Amy Fontinelle is a writer, editor, and personal finance expert.

Her articles have appeared at Investopedia, Bankrate, MassMutual.com, The Simple Dollar, Interest.com, Yahoo, Forbes.com, SFGate.com, Bankaholic, Mortgage-Calc.com, Saving Advice and other sites.

Amy’s clients include personal finance websites, financial institutions, public policy organizations, academic journals, and professional economists.

Recommended for Business Loans
Lendio
Lending Express

Important Disclosures. Please Read Carefully.

Persons facing serious financial difficulties should consider other alternatives or should seek out professional financial advice. This website is not an offer to lend. Lendgenius.com is not a lender or lending partner and does not make loan or credit decisions. Lendgenius.com connects interested persons with a lender or lending partner from its network of approved lenders and lending partners. Lendgenius.com does not control and is not responsible for the actions or inactions of any lender or lending partner, is not an agent, representative or broker of any lender or lending partner, and does not endorse any lender or lending partner. Lendgenius.com receives compensation from its lenders and lending partners, often based on a ping-tree model similar to Google AdWords where the highest available bidder is connected to the consumer. Regardless, Lendgenius.com’s service is always free to you. This service is not available in all states. If you request to connect with a lender or lending partner in a particular state where such loans are prohibited, or in a location where Lendgenius.com does not have an available lender or lending partner, you will not be connected to a lender or lending partner. You are urged to read and understand the terms of any loan offered by any lender or lending partner, and to reject any particular loan offer that you cannot afford to repay or that includes terms that are not acceptable to you. By submitting your information via this website, you are authorizing Lendgenius.com and/or lenders and lending partners in its network or other intermediaries to do a credit check, which may include verifying your social security number, driver license number or other identification, and a review of your creditworthiness. Credit checks are usually performed by one of the major credit bureaus such as Experian, Equifax and Trans Union, but also may include alternative credit bureaus such as Teletrack, DP Bureau or others. You also authorize Lendgenius.com to share your information and credit history with its network of approved lenders and lending partners. For qualified consumers, our lenders offer loans with an Annual Percentage Rate (APR) of 35.99% and below. For qualified consumers, the maximum APR (including the interest rates plus fees and other costs) is 35.99%. All loans are subject to the lender’s approval based on its own unique underwriting criteria. Example: Loan Amount: $4,300.00, Annual Percentage Rate: 35.99%. Number of Monthly Payments: 30. Monthly Payment Amount: $219.36. Total Amount Payable: $6,581.78 Loans include a minimum repayment plan of 12 months and a maximum repayment plan of 30 months. In some cases, you may be given the option of obtaining a loan from a tribal lender. Tribal lenders are subject to tribal and certain federal laws while being immune from state law including usury caps. If you are connected to a tribal lender, please understand that the tribal lender’s rates and fees may be higher than state-licensed lenders. Additionally, tribal lenders may require you to agree to resolve any disputes in a tribal jurisdiction. You are urged to read and understand the terms of any loan offered by any lender, whether tribal or state-licensed, and to reject any particular loan offer that you cannot afford to repay or that includes terms that are not acceptable to you.

Lender’s or Lending Partner’s Disclosure of Terms.

The lenders and lending partners you are connected to will provide documents that contain all fees and rate information pertaining to the loan being offered, including any potential fees for late-payments and the rules under which you may be allowed (if permitted by applicable law) to refinance, renew or rollover your loan. Loan fees and interest rates are determined solely by the lender or lending partner based on the lender’s or lending partner’s internal policies, underwriting criteria and applicable law. Lendgenius.com has no knowledge of or control over the loan terms offered by a lender and lending partner. You are urged to read and understand the terms of any loan offered by any lenders and lending partners and to reject any particular loan offer that you cannot afford to repay or that includes terms that are not acceptable to you.

Late Payments Hurt Your Credit Score

Please be aware that missing a payment or making a late payment can negatively impact your credit score. To protect yourself and your credit history, make sure you only accept loan terms that you can afford to repay. If you cannot make a payment on time, you should contact your lenders and lending partners immediately and discuss how to handle late payments.