Home > Business, Development, Money Matters > Starting a business without capital

Starting a business without capital

Financing a business is a barrier for entry for many businesses. Many entrepreneurs however started their businesses without any capital. There are many self made entrepreneurs who started off without much and have since built large multimillion dollar companies. We hear of rags to riches stories all the time and they make our hearts tickle, but can this be done in real life or are these just rare stories that happen to others.

Capital is an essential component in starting a business, but having no capital doesn’t mean that you cannot start a business. You may not be able to do all you would like to do at that time, but it is possible to build from the bottom going up. The Jews believe that to be able to succeed in business you have to have been bankrupt more than three times. This means that you can re-launch yourself and your business successfully over and over again even in the face of challenges. Lack of finances should not mean the end of your business. If you can rise up after bankruptcy, then you really become a real millionaire.

The real rich and famous, the ones that didn’t get rich over night often exclaim that new money doesn’t often stand the test of time. Real wealth is that that passes through several generations. Footballers, celebrities are all in the first generation wealth category and many of them are bankrupt by the time they die. The business world is tough and requires a great sense of commitment that will stand even if the bank is refusing to give loans, even when you file for bankruptcy.  

To succeed in business you need to be creative and be able to think quickly. If finance is the challenge, creative solutions are required to find solutions to the problem. Many great people have started of knocking on doors facing rejection after rejection and failure after failure, but eventually made it. Patricia, a Micro MBA graduate and  eleven friends who lived in the shack lands in Cape Town set out to build themselves houses and started Victoria Mzenge Housing Saving Scheme. They each put a small amount of money aside every day and began looking for land. Other women began to hear about the scheme and more and more women began to join the scheme. They built houses for their families and went on to build homes for thousands other people. The project has been instrumental in the building of 55 000 houses changing the lives of countless shack dwellers. A single woman with a dream made it a reality, not only building a house for herself, she eventually build more than 55 000. This is testament to the fact that money is not the answer to all things and that where there is a will there is away.

Have a vision

A vision directs you and guides all your efforts. The clearer the vision, the easier it is to achieve. Set goals that are SMART, Specific, Measurable, Achievable, Realistic and Time bound. Aim for results.

Get Advice

Research shows that those who get assistance at the beginning often perform better than those who don’t. You cannot know everything and getting advice early can keep you out of trouble. Get advice on where to get money and how to finance your business.

Be prepared to start from the bottom

Not all business people start off with the capital they need. Many go via another route before they get to their final destination. Be prepared to work extra hours and do odd jobs to raise the money that you need to start the business you want. Downgrade and give up some luxuries so that you can achieve your dream of starting a business.

Work out your financial requirements

When starting your business, you need to put together a business plan. This plan sets out how you intend to operate your business and includes essential financial forecasts. These forecasts will help you determine how much funding the business is likely to need, what you need it for and when you will need the money. For more information, see our guide on how to prepare a business plan.

How much will you need – and when? 

It’s essential to have an accurate idea of your financial needs. Once you’ve calculated the amount you’ll need to cover your initial start-up costs, you’ll also need to factor in your running expenses. Customers may not pay you immediately – but you will still need to pay all your bills to keep trading. It’s sensible to have sufficient capital to cover projected expenses for at least six months.

Consider your own needs

At the same time, you need to make sure that you have taken into account how much money you need to live on. In the early stages, a new business is unlikely to produce spare cash that you can spend on yourself.

Keep your costs down

Renting an office in the most expensive office park will not bring money into the business. Do not spend what you do not have. Buying new furniture and computers are not necessary. Keep costs low by working from home, using old furniture and buying second hand where possible. When you have hit the big time and can afford expensive rentals, then go for, but do not rush into buying and spending money that can be used to build the business.

Choose the best financial option

  • The type of finance you choose will depend on what kind of business you are starting, how much money you need and what you will use it for.
  • Many people use their own savings or personal borrowings to fund the business. This may be the only choice if you can’t convince anyone else to lend you money or invest in the business –
  • Family or friends might back you. However you should carefully consider the risk that they could lose their money if your business fails –
  • If you can put up some finance yourself, and have a credible business plan, you may be able to borrow from a bank. Many businesses use overdrafts for day-to-day borrowing and loans to finance large purchases such as equipment. If your business is likely to have peaks and troughs in its cash flow, it’s essential to be able to clearly illustrate these to your bank so you can plan an overdraft –
  • A larger business with good prospects might attract outside investors. For example, “business angels” typically invest £10,000 or more in exchange for a share in the business –
  • You might qualify for a grant – for example, if you are setting up a business in a deprived area.

Most businesses use a mixture of finance sources. For example, you might invest your own money in market research, bring in outside investors to share the risk and borrow from the bank to purchase equipment and machinery.



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