How To Start A Business Without Going Into Debt

how to start a business without going into debt

It is a common misconception that you need to go into debt to start a business. Whether it is a business loan, a business credit card, or a business line of credit, there are plenty of debt products out there for aspiring entrepreneurs who need a cash injection in order to get their business off the ground. But the truth of the matter is that most people bootstrap their small businesses – according to the U.S. Census Bureau, 64 percent of people that start a business do so using their personal savings and money borrowed from family and friends, rather than taking out a business loan or opening a credit card to fund startup costs. 


And experts recommend that aspiring entrepreneurs avoid taking on debt to start a business if possible. Debt can be a destroyer of a new business. The psychological impact of growing debts alone can hinder small biz development.

But how do you get the capital to start a new business if you are not supposed to borrow it? Many entrepreneurs save up until they have enough money to get their business idea going, and plenty borrow money from friends and family or crowdsource it. You may want to work part-time on your idea at first, until your business is lucrative enough to stand on its own. And, of course, you want to minimize your startup costs as much as possible so you can afford to cover them without taking on debt. 

Use Your Personal Savings 

Personal savings may be the number one source of funding people use to start a small business. It might take you a while to save up the money you need to cover startup costs, but it is worth it to avoid taking on debt when your business is still too young to be profitable. Many aspiring entrepreneurs work overtime at their existing job or take a second gig to earn extra money towards their new venture.

Ask Friends And Family For Money 

Friends and family may be interested in helping you scrape together money to start a business, but you need to treat them like real investors. When you ask for the money, go into the meeting with a business plan and realistic projections for the first two years. Give payback dates and do your best to honor them. You can easily destroy your relationships by borrowing money to start a business and not repaying it or not repaying it on time. Use this business funding option with caution.

Crowdfund Your Idea 

If you have a business idea that you think will be popular, you can try crowdfunding it on a platform like Indiegogo or Kickstarter. Rewards-based crowdfunding platforms like these rely on creators offering something to their funders in return for the money, often small tokens like merchandise or event tickets – but the more money someone gives you, the bigger the reward should be. Crowdfunding works best if you have a good product idea and a means of reaching an audience online

Work Part-Time On Your Business Idea 

You may be able to avoid taking on small business loans by working on your business idea part-time until the business is lucrative enough to support you and stand on its own. Sure, it is hard to get a business off the ground when you are working full-time at a day job, and it is tempting to take out small business loans so you can quit your day job right away and focus all your energy on building your business. But, you know what they say about not quitting your day job. 

Work on your business in the evenings and on weekends until you are able to pay yourself a full-time salary. You will be able to stay out of debt and your business will be more financially stable. Ditch your debts and be a profitable business boss!

Keep Startup Costs Low 

You should be spending the absolute bare minimum when it comes to startup costs. Do business from your kitchen table instead of renting an office space in the beginning, for example. If you do need to rent an office space or other facilities to start, try to get your office furniture and other equipment used or buy it from an affordable retailer, like IKEA. 

Keep in mind that when you first start a business, you don’t need to scale up to a full staff right away, either. While it is definitely worthwhile to hire a bookkeeper to help with your business finances, you don’t need to hire a bunch of employees until your business is generating the funds to pay them. Work by yourself or with your business partners at first, and once your business is bringing in some money, then you can scale up debt-free. Of course, once your business is bringing in sufficient revenue, you may reconsider getting a small business loan in order to expand or take advantage of an opportunity that comes your way. 

Building A Budget-Friendly Business

Starting a business without borrowing money is more common than you might think. Avoid burdening your young business with debt, so it can grow freely. We wish you the best of luck on building your business on a budget and without breaking the bank!

Official Bootstrap Business Blog Newest Posts From Mike Schiemer Partners And News Outlets