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How to Start a Business without a Loan

Advice on how to start a business when a Loan is not an option

Starting a business requires the owner to have the capital available to sustain the business for at least one year. While this is likely the case with most startups, having a way to access additional funding without seeking a bank loan is ideal. Even without investors and doing most of the work yourself, you can still start a business without applying for a single loan.

Maintain a Primary Job

One way to ensure that you can take care of your household expenses and have some available to put into your new business is to maintain a primary job. In other words, don’t quit your day job. Have management personnel in place to handle the business while you work to make sure the doors stay open.

Consider Hiring Friends and Family

Friends and family may volunteer some of their time to help you out with your new business. As a startup, they are likely to work for free. Once you are able to put them on payroll, it is ideal to do so. Friends and family make great employees when they are appreciated and their hours at your business do not interfere with their regular jobs and/or family schedules.

It is important to hire those that you can trust with your business. If something with the business were to go sour, or your relationship in general, it could jeopardize the business and the relationship. It is tricky to ask friends and family to work for you when you cannot offer pay, but in most cases, they will be happy to help out. Make sure that their kindness is not taken advantage of.

Maintain Low Overhead Costs

Try to keep your overhead costs low. Use services that bundle rather than individual services for everything your business needs. A prime example of this is combining your Internet and phone services, with voicemail service. Work as much at the business as you can yourself. Not having a big payroll right out of the gate is ideal as it will allow for more revenue to go back into the business.
Blend Services

Consider offering consulting services along with your main product or service. This shows other business owners that you are an expert in the industry and have something to offer them that can help their business goals at the same time. What this does is creates income for your business and develops working relationships. There will be times when other businesses in the industry will need what yours offers, and when you are in good standing with them, your business will be their first choice as a vendor.

Liquidate Unnecessary Possessions

Sell everything you do not need. Take these funds and create a business savings account that earns interest. This will become the starting point for the business’ emergency fund if a major financial hit occurs or business does not take off as quickly as planned. This is a responsible measure to take to prevent taking out a loan and paying back one and a half times (on average) the amount you borrowed.

You may only have one opportunity in life to start a business. You will have multiple opportunities to buy “things” in your life.

Approach Investors

Don’t be afraid to seek out investors. Investors do not really have any say in what decisions you make for the business; they just provide the money to keep you going. Of course, they are going to expect a return on their investment. This is typically an additional percentage of their investment in a set period of time.

Reinvest Profits

Reinvest your business’ profits back into it. This way, you literally are funding the business yourself, without the help of investors or banks. It also helps during tax time to account for the profits that are not reflected in a bank account balance.

Closing Thoughts

As you write up your business plan and prepare to put the wheels in motion, create a list of business goals. These should be small milestones for your first year, with one large goal to achieve by the end of your first year in business. This helps keep you, as the business owner, motivated to market the business and expand with new products and services over time.

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