To most of us, the idea of starting a business means that we will need a bunch of our own money to get things off the ground. But what if you have a great idea for a business, the talent and skills to make it work, but you have little or no money to get the business off the ground? Is the idea of starting this business dead in the water? Not necessarily. Here are some ideas about starting a business with little or no money of your own.
How to Start a Business with No Money: 8 Ways
1. Start a Service or Consulting Business
Depending upon the service(s) offered, it may take little or no money to start a service or consulting business. If you have expertise in areas like freelance writing, design and other related types of services, you can likely get started with little or no funding. The same applies to many types of consulting. You will need to get the word out that you are hanging out your own shingle.
Assuming you have a computer and internet access, most services of this type are offered remotely. Once you obtain clients you simply get to work and get paid. Once you establish the business, set aside some funds as a reserve to fund any expansion needs, such as upgrading computer equipment.
Crowdfunding platforms allow a number of small investors to contribute funds to the platform that will then provide funding to one or more startups, or companies looking for capital to expand their business. Business owners can pitch their startup idea to the principals of the platform in hope of being considered for funding. Many crowdfunding platforms might focus on businesses in a single industry or closely grouped lines of business.
You will want to check out the principals behind the crowdfunding platform to ensure that it is a reputable one.
Business incubators are firms that help start-up companies through the early phases of their development until they reach a point of having sufficient financial, physical and people resources to move forward on their own.
Incubators are for-profit firms that will invite start-ups to apply for a “class” of funding. They offer management expertise to these start-ups and often take an equity position. This expertise can be invaluable to a new or growing business.
4. Angel Investors
Angel investors are individual investors who put up their own money to invest in promising start-ups and early-stage businesses. In exchange for this funding, the angel investor will typically receive an ownership stake in the business.
Angel investors might make a one-time investment in the company or provide funding at key stages in the business’ development. Angel investors are often more interested in the entrepreneur starting the company than they are in the business itself. When pitching an angel investor on funding your business, you are selling yourself as much as your business idea.
Angel investors may invest directly, through angel investing networks or even through crowdfunding platforms.
5. Line of Credit
Depending upon your situation, you may be able to get a line of credit through a bank or other lending source. If you already have a relationship with a bank this might be the first place to start. A line of credit differs from an outright loan in that you only tap the line of credit when needed to make a business expenditure. The amount outstanding will be the amount that makes up the interest charges. This is still debt, but the use it as needed feature can help keep the amount of business debt low if used responsibly. Shop around as terms will vary regarding interest rates, the credit limit and repayment terms.
6. Small Business Administration
The Small Business Administration (SBA) works with small businesses to facilitate loans through participating lenders. The SBA doesn’t lend money directly, but rather works with the small business to match them with the right lender for their needs. The SBA offers guarantees that minimize the risk for participating lenders.
Beyond their loan services, the SBA offers a wealth of consulting and guidance to small business owners, including consulting by former business executives who volunteer with the organization.
7. Small Business Grants
Small business grants are essentially free money. Unlike a loan which has to be repaid, a small business grant is just that, a grant. These grants are much more rare than small business loans. The application process is intense and there is a lot of competition for these grants.
One source of grant information are small business development centers (SBDC) which are funded in part by the SBA. While the SBDCs don’t directly provide grants, they can be a good source of leads to find organizations who do.
It’s important to know that most business grants are fairly specific about how the money can be spent. Grants can be for specific purposes such as buying equipment related to an environmentally-oriented business venture, for example. The funds cannot be used outside of the parameters set by the organization granting the money.
8. Friends and Family
Your family, friends, perhaps even professional contacts made over the years might all be sources of funding for your new business. This isn’t about going in and using your relationship with them to beg for money.
Rather, this is about sharing the highlights of your business plan with them and showing that you have thought through what your business’ path to success looks like. Be sure to have an agreement ready for both parties to sign outlining the terms of the loan, repayment terms, and interest rate and other details just as you would with a loan from a bank or any other lender.
While these are generally people who believe in you and want to be sympathetic to your needs and your goals, it’s best for all parties if you treat this like an arm’s length transaction. While your relationship will get you an audience, when money is involved it’s best to have all “i’s dotted, and t’s crossed.”
It’s never too late – or too early – to plan and invest for the retirement you deserve. Get more information and a free trial subscription to TheStreet’s Retirement Daily to learn more about saving for and living in retirement. Got questions about money, retirement and/or investments? Email Robert.Powell@TheStreet.com.