Starting A Business Without A Business Loan – 3 Ways

You don’t really need outside money – things like business loans or venture capital – to start and grow a business.

In fact, there are over half a million (500,000) new businesses started each year in this country (each and every year) and I can guarantee you that very few of them get or qualify for a business loan or some other form of outside capital.

Given the poor capital markets that small businesses face these days with banks not lending to small business let alone to startups, over 90% of all new businesses have to get their companies up and running without any type of outside financial help at all.

So, how do they do it?

They find a way. Which is the defining characteristic of an entrepreneur – to find a way to make it happen.

All businesses are limited in the amount of resources they have to run and grow their companies. Thus, in order to survive and expand, they have to get the most out of the resources (cash, capital, equipment, property, labor, etc) they do have.

Therefore, those businesses that do succeed in starting up their companies without business loans do so by finding a way to make what they need happen. For example, a business that has no money or staff (limited resources) to kick off a marketing campaign but is still able to drive customers to the business by using free resources like social media, word of mouth marketing and referral programs. Or, the new bakery business that can’t afford a kitchen or kitchen equipment but grew the business by using other restaurant’s stoves and ovens after hours and providing them a percentage of revenue earned in exchange.

While getting a business loan or millions in venture capital will surely make your business life easier, having those resources is not a key element for success. What is is the ability to find a way – any way – to start and grow your business regardless of what you have on hand.

3 Ways To Start Your Business Without A Business Loan

The first thing to understand is that all businesses are unique and thus all have to find their own unique ways to overcome their particular obstacles. To that point, we tried to generalize these 3 simply ways to startup a new business as a means of not providing a concert road map to your individual business success but as a means to demonstrate what can be done and then let you take the ball from there and apply it to your own situation.

Lastly, while the following may be instinctive to some they may also seeming impossible to others, do know that businesses have been using these methods or some variation of them to start their companies since the beginning of time.

1) Don’t Use Any Money.

Most of the time, new business owners will use the capital (money) they have on hand to get tasks done – either by hiring labor to do it (be it employees or professional help) or purchasing a product or service that will complete the task for them. What this means is that their money is being spent to save the business owner some time and effort.

However, if you don’t have any money – then you just have to do those things yourself. And, for those business tasks you are unsure about, you just have to take the time to learn.

Here is a great example. When Bill Gates first started Microsoft, he too had limited resources and spent most of his money hiring geeks (software designers, software engineers, etc). But, that left no money for legal issues or accounting. Thus, when he hired someone, he would also tell them; “you now have to go learn the legal side and handle that for us” on top of all your other duties.

Did it work? Look at the company now.

Other example could be a retail business wanting to set up a brick and mortar store front but not having the money to do so. Thus, the owner takes the business online first and uses many of the free resources out there (like eBay, Amazon, WordPress and even Facebook.) to do it – followed by spending a lot of their own time making it all come together.

Then, when the business gets to a certain point that it can afford rent or a lease and all the other expenses related to running a traditional retail business – it can then decide if that is the direction the business still wants to pursue.

Other ways to get business task done without spending money (especially if you don’t have money) are:

Note: These are just a few of the major expenses that small businesses have to face.

For marketing: There are so many free ways to market a business in this day and age – all mostly related to social media. If your potential customers are out on these free social networking sites – then so should you be.

For labor: Most new businesses don’t need full time labor as they just can’t keep people busy enough all the time. Thus, look for ways to hire interns, college students, or even people that will work for equity in the company. Thus, you can still get done the tasks your business needs without spending a dime.

Or, hire local or national free lance individuals who can get those tasks done at a fraction of the cost of hiring a full-time or even part-time employee. Thus, their minimal cost is directly related to the revenue they help bring into the business.

For operations/management: Accounting, inventory management and sales tend to require very sophisticated software programs to control and manage – or do they? There are many bare bones, open source software programs out there on the market that can handle nearly any management task in your business. And, they are all free. The one draw back is that they usually offer no live support but most have forums where you can get answers to all your questions – quickly and on your time. Thus, these free programs can easily become your front and back office without a single monetary expense to you.

It just takes some time in finding these free programs and learning how to get the most out of them.

2) Work On Your Business Part-Time.

One of the hardest parts about starting a new business is also having to cover personal expenses during the startup phase.

It is estimated that it takes a new business 12 to 18 months before it hits its breakeven point – meaning that it takes more then a year before the business is earning enough in revenue to cover just the business’s ongoing expenses – let alone having enough in profits to pay the business owner.

And, if you can’t access an outside business loan, this also means that the business owner might have to go that 12 months plus without a paycheck.

On top of that, throw in this poor economy and that 12 to 18 months could stretch out to 2 plus years before the business hits that all important breakeven or profitability point.

To combat this, many new entrepreneurs keep their day jobs and work on their businesses part-time – at night and on weekends during this startup phase.

This means that the business has to be started on a smaller scale and potentially limp along until the business is able to sustain itself.

However, keep in mind that this is only temporary and that end goal is to eventually transition full-time into the business when it is feasible to do so.

One example of this (and there are many) is the moving company PODS. The founder of PODS keep his day job and worked just a few hours each night on his business plan and business. He did this as he was not in a financial position to quit his job as well as his desire to spend some quality time with his young family while the business began its assent.

However, with some personal income, this business owner was also able to:

  1. Take a lot of the stress of a new business off his shoulders in regards to covering his personal expenses,
  2. Provide some money to put into the business as needed, and
  3. Most importantly, allowed the business to focus on a long-term growth strategy as opposed to a short-term, get revenue now strategy, that would have forced the owner to make bad overall business decisions.

Thus, by having a full-time or even a part-time job in conjunction with the business, will allow new entrepreneurs time and additional resources to research and develop their products and services, market the company and properly grow the business for the long-term (which is the end goal after all).

3) Use Your Own Savings.

Given the poor likelihood that most businesses will get or qualify for a business loan – even for a SBA guaranteed small business loan – means that many business owners have to rely on personal resources to fund their new companies.

This can be good in several ways. First, the business owner already shows the discipline needed to make the right decisions to the benefit of the business as saving money takes a lot of discipline.

Second, by already having the needed funds in place, the entrepreneur can more easily focus on starting and growing the business and not worry about debt payments or resistive loan covenants.

And, lastly, starting a business is about securing the financial future of the business owner – almost the same reason that people save money. Thus, using personal resources is essentially just trading one method of financial security for another. As the business grows, it will be able to offer much more to the future wherewithal of the owner then their savings ever could.

Types of personal resources that can be used include:

-Personal savings accounts,

-Selling off personal assets like stock and bonds or other personal property that has monetary value but no longer has personal or nostalgic value.

-Or, taking retirement funds and investing them in the new business.

Lastly, even if you don’t have savings or personal resources now, you can always continue to work at your present job or any job while you save those funds. Again, it is just temporary until you have the necessary assets on hand to start your business and realize your true dreams.


Having a business loan or some form of outside capital might make it easier to run your new company in the beginning – until you have to pay those funds back – but having a business loan is not really necessary to start a new company or to succeed in business.

There are many ways around having to seek a business loan – a few we outlined here.

Just think about the hundreds of thousands of businesses that get started every year all over the world – since the beginning of time – and how they were able to find ways to get their companies up, running and on a solid path to success – all without business loans.

If they can do it, so can you – you just have to be willing to try and find ways, your own unique ways, to make it all happen.

Joseph Lizio holds a MBA in Finance and Entrepreneurship, is the founder of Business Money Today, has a strong commercial lending background and is regarded as an expert in business and finance – specifically Small Business Loans and Working Capital.

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