loans or venture capital – to start and grow a business.
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 forms of outside capital.
these days with banks not lending to small business let alone to start-ups,
over 90% of all new businesses have to get their companies up and running
without any type of outside financial help at all.
They find a way. Which is the defining characteristic
of an entrepreneur – to find a way to make it happen.
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 to happen.
For example, a business that has no money or staff (limited
resources) to kick off a marketing campaign but are 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 the restaurant’s stoves and ovens after hours and providing them a percentage of
revenue earned in exchange.
will surely make your business life easier, having those resources is not a key
element for success. What 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 simple ways
to start-up 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.
may also seem 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.
do those things yourself. And, for those business tasks you are unsure about,
you just have to take the time to learn.
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. Do you really want to know what business
tricks he used? You
can know this here.
Did it work? Look at the company now.
Another example could be a retail business wanting to set up a
brick and mortar storefront 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.
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 a 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
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?
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.
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.
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 drawback 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 start-up phase.
before it hits its breakeven point – meaning that it takes more than a year
before the business is earning enough in revenue to cover just the business’s
ongoing expenses – let alone having enough profits to pay the business
owner.
means that the business owner might have to go that 12 months plus without a
paycheck.
months could stretch out to 2 plus years before the business hits that all
important breakeven or profitability point.
and work on their businesses part-time – at night and on weekends during this
start-up phase.
scale and potentially limp along until the business is able to sustain itself.
feasible to do so.
founder of PODS keeps 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 ascent.
However, with some personal income, this business owner
was also able to:
Take a lot of the stress of a new business off his shoulders
in regards to covering his personal expenses, Provide some money to put into the business as needed, and
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.
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 an SBA guaranteed small business loan –
means that many business owners have to rely on personal resources to fund
their new companies.
already shows the discipline needed to make the right decisions to the benefit
of the business as saving money takes a lot of discipline.
worry about debt payments or resistive loan covenants.
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 than their savings ever could.
Types of personal resources that can be used include:
-Personal savings accounts,
personal property that has monetary value but no longer has personal or
nostalgic value.
business.
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.
Conclusion
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.
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.
to try and find ways, your own unique ways, to make it all happen.
holds an 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.
