Dreaming of starting your own business but think you don’t have enough money? Whether you want to be your own boss, make money from a side hustle, or achieve a better work-life balance, so long as you are willing to work hard and be creative, owning your own business is within your reach.
The internet, Software as a Service (SaaS), and marketplace and sharing economy platforms have all but erased many of the capital requirements to set up a business. It’s faster and easier than ever to get up and running in a wide variety of businesses, with barely any financial investment. There are also many options for low-capital businesses and options for funding them if you don’t have money set aside to invest.
In this guide, we’ll show you how to turn your existing skillset into a successful business on a shoestring budget.
Find a No Capital Business IdeaWhat kinds of businesses can you start with no capital? When you think about starting a business, these are some of the costs you could expect to incur:
RentTenant improvementsOffice furniture and suppliesLaborTools and equipmentRaw materialsOpening inventoryWebsite design and hostingAdvertising or promotionsSoftwareInsurance, licenses, or permit feesA low-to-no capital business would be one where most of these costs don’t apply. An online business or home-based business lets you eliminate rent, tenant improvements, and office costs—and maybe even take a tax deduction for using part of your home for business. If you do everything yourself, you can eliminate labor costs.
By choosing a business that uses the tools and equipment you already have, you can eliminate that cost. Service or knowledge-based businesses don’t require inventory or raw materials since you won’t be making or selling any physical goods. You will probably require a computer, although you may be able to run some businesses entirely through your phone.
What about a website, or advertising and promotion? You may be able to eliminate these entirely by setting up shop on one of the many service provider marketplaces and sharing economy marketplaces that handle all that for you. To name just a few:
TaskRabbit and Thumbtack for errands, handyman work, and household tasksWag and Rover for dog walkingFiverr or Upwork for media and technology professionalsAirbnb or Vrbo if you want to rent out a room in your homeCurbFlip or Rent My Driveway if you have a desirable parking space to rentGetaround or Turo if you want to rent out your car when you’re not using itEtsy, Amazon, or eBay for homemade or resale productsUber, DoorDash, or Lyft if you’re willing to deliver food or taxi passengersSome of these platforms may even provide some form of insurance as part of their offering, but you should be sure to understand what is covered and whether you need supplemental insurance.
Of course, all of these platforms take a healthy cut of your payment, so you are still paying for the website, advertising, and insurance—just not as an upfront, out-of-pocket cost.
If you really want to spend zero money, you could do all of your accounting on paper and only accept payment by check or cash, but as a practical matter you’ll probably want to use some kind of accounting and tax software and set up a merchant services account so you can accept credit cards, as that is the preferred payment method for U.S. consumers.
The only costs you may not be able to avoid as a business owner are any licensing or permit fees required by your county, city, or state for your type of business, and legal fees if you decide you want to incorporate.
You really can start a business for little money if it’s one that’s home-based, has no employees, doesn’t do any manufacturing or retailing, and requires no upfront investment in a website or marketing. If you’re looking for ideas, simply search the web for “no capital” or “low-cost” business ideas and you will find an abundance of lists to inspire you.
Set Realistic ExpectationsJust because it’s easy to set up a business with no money, doesn’t mean it’s going to be easy to run one—or that you’ll instantly find the freedom, gratification, and work-life balance you’ve been seeking.
Entrepreneurship is hard work, and you may find yourself adjusting to the fact that now you have multiple bosses (only now they’re called “customers”). Since you have no employees, you have to do everything —and there may be parts of the business you really dislike or are not good at. You might find that you’re putting in more hours at work than ever. And even though you started the business with no money, you still need money.
According to the U.S. Small Business Administration (SBA), only 33% of all startups make it to their tenth birthday. Running out of money is the biggest reason, followed by a lack of management experience and weak marketing efforts.
You’ll still need income while you’re building the business, and you may also have ongoing business expenses that you must fund. Make sure that you do your due diligence to get a real appreciation of how long it can take to get to a steady income in your chosen business. Prepare a business plan that shows your projected income ramp and also includes all of the ongoing expenses you’re likely to encounter. These include taxes, fees, subscriptions, transportation, office supplies, software, and any others that are specifically related to your business.
Even if you are independently wealthy, have a spouse or partner who can carry you, or have a nest egg set aside for just this purpose, chances are that there’s a limit to your tolerance for running a money-losing business, so you really need to create some financial projections. And, if you’re not independently wealthy or supported by a partner or a nest egg, you’ll need some source of funding to keep you afloat until the business takes off. Here are seven possibilities:
1. Keep Your Day JobKeeping your day job gives you a steady income as you grow the business. But now you essentially have two jobs. You will either have to work a lot of extra hours on top of your full-time schedule, or your new business will have to take a back seat. That could slow the growth of the business, so be sure to consider that in your financial projections.
2. Family and FriendsFunding a business from friends and family is a common source of financing to help you get your business off the ground. After all, who has more faith in you and your abilities? But be wary of relying on handshake deals and verbal agreements, or you may risk strained relationships if things go south.
Treat it like any business deal. Make sure you know the terms and conditions. Is the money a gift you don’t have to repay? Is it a loan? If so, what is the time frame for repaying? Is it an investment, and if so, what percentage of the company does your funder own, how much say do they expect to have in operations, and how soon are they expecting the investment to pay off?
All of this should be discussed, agreed on, and documented, the same way you would with any other lender or investor. If would-be-friendly funders are not willing to engage in that kind of process with you, perhaps it is not a good idea to look to them as a funding source.
3. Apply For an SBA LoanThe SBA makes loans to small businesses in the U.S. An SBA loan can start from a few hundred dollars up to a few million dollars. The interest rates vary from 2% to 8% depending on both the lender’s and borrower’s circumstances. You will need a lot of documentation and a detailed business plan. It is also important to carefully read the repayment policy of the loan before applying for it and include that in your financial projections.
Learn more about small business loans and how to apply.
4. Apply For a GrantThere are many, many grant programs from government and private sources, and unlike a loan, grants don’t have to be repaid. Grants are not for everyone though. They are typically available for specific types of business that the grantor wants to incentivize, such as nonprofits, green businesses, rural businesses, for veterans, or certain categories of historically disadvantaged people.
The application process can be lengthy and exhaustive and to win grant funding, you must have a detailed business plan. This kind of funding can come with spending constraints and reporting requirements that may restrict the way you do business and force you to spend time and money on compliance. It is important to understand the terms and conditions of the grant, first to see if you qualify before spending time applying, and then to understand how those will impact your business because the grant can be revoked for noncompliance.
Learn more about small business grants and how to apply.
5. Use a Line of CreditEstablished businesses can often obtain a line of credit, but for a new business, you might have to give personal guarantees to obtain it. That will require you to have a good credit rating and collateral.
6. Use Personal Credit CardsMany a venture has been funded using the owner’s personal credit cards. If you have a good credit rating, this can be a much faster and easier way to get a loan, as you don’t need a business plan and don’t have to go through a lengthy application and underwriting process. The downside is that interest rates can be very high—ranging from about 14% to 23% as of this writing. Those interest costs can become significant if you’ll be carrying the balances for a long time, so be sure to include that in your financial projections.
7. CrowdfundingCrowdfunding platforms like GoFundMe and Kickstarter are changing the landscape of the traditional methods of raising capital. From tech gadgets to making an art documentary, any type of business and product can raise money from anywhere in the world to bring the idea to reality, typically in return for some kind of consideration, such as free products or shares of stock.
Crowdfunding also helps to gauge the reaction of the market before you actually launch the product. You don’t have to undergo any kind of credit check or provide an extensive business plan. However, it requires a lot of expertise and effort to run a successful crowdfunding campaign, and the outcome is far from guaranteed. According to research from Fundera, less than 25% of crowdfunding campaigns reach their goals.
Of course, one time-honored way to start a business with no money is to use other people’s money, so if you have the kind of business that can qualify for loans or grants, the creditworthiness to obtain a credit line or credit cards, or the savvy to run a successful crowdfunding campaign, you aren’t necessarily limited to the type of businesses that have no upfront capital requirements.
Related: 6 Tips For Starting a New Business
Start Your Business TodayMany people dream of owning their own business, and now more than ever, a lack of startup capital need not hold you back. And with today’s marketplace and sharing economy platforms, it’s easy to try out any number of business ideas and see if you actually like them, and like being a small business owner, without risking your own capital. Money may still be required to scale, but you can start your entrepreneurial journey without any money and bootstrap your way to success if you’re willing to work hard.
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