Key takeaways:

• Starting a business  without loans offers greater control and flexibility, but requires careful planning and realistic expectations about how to grow with fewer resources.
• Small business loans and financing can help you grow faster, and be more competitive, but also carries financial risk. 
• Success often comes from combining multiple strategies: starting lean, reinvesting profits strategically, and knowing when financing might make sense for growth opportunities.

When Levi King started his sign manufacturing and repair business in Idaho in his twenties, getting a business loan wasn’t within the realm of possibility. He had no credit history, and no idea how to get a small business loan. It didn’t stop him, though. 

Fast forward two decades and he took out a home equity loan for several hundred thousand dollars to start Nav (named “Creditera” when it was founded). Investors came on board to help the company grow further, and today, Nav has served over two million small business owners.

He started one business without debt, and another with one of the riskiest types of loans. Both businesses were successful in their own right, demonstrating that there’s no single right way to start a small business. 

If you’re on the fence, wondering whether you can start a business without loans or  whether you should borrow to grow bigger, here’s how to answer that question for yourself. 

The Appeal of a Debt-Free Start

While working in sales, Sara Blakely started Spanx, using $5000 of personal savings to get it off the ground. She then grew her business without debt or outside investors—a feature on the Oprah Winfrey show helped accelerate growth.

A self-funded startup is the dream of many entrepreneurs, and with good reason. 

You’ll maintain complete control over the business without the worry of keeping up with payments on loans or other types of financing. And you’ll enjoy the financial flexibility that comes from avoiding debt. 

For new business owners, who may still be figuring out their market or trying to prove that customers are willing to spend money for their product or services, not having to make decisions because you have lenders to pay back, can be freeing. You have more ability to say “no” to a terrible client or job, or to selling a product you feel less than great about. 

Without monthly (or even weekly) loan payments, entrepreneurs can reinvest more of their early revenues into opportunities for growth. This flexibility becomes particularly valuable during economic downturns or seasonal slowdowns, when having lower fixed expenses can mean the difference between survival and closure.

And if you want to raise money, you may find that angel investors or venture capitalists are less interested in a debt-strapped business. 

Beyond the practical benefits, there’s also a psychological advantage to debt-free entrepreneurship. Working on limited funds, business owners who bootstrap may have no choice but to get creative. They learn to maximize every dollar, negotiate more effectively with suppliers and customers, and find innovative ways to grow with limited resources. Those creative problem-solving skills can serve them well throughout the lives of their businesses.

The Reality Check

The original three founders of Starbucks invested $1,350 each, and borrowed $5,000 from a bank, to open their first store in Seattle in 1971, according to the Starbucks archive.

While the idea of a debt-free start is appealing, entrepreneurs must confront some sobering realities. The average small business requires approximately $40,000 in their first year of operation, according to Shopify research. Costs vary depending on the type of business you start, of course. You may be able to start an online or service business with a few hundred dollars, while a restaurant may require several hundreds of thousands of dollars in startup capital. 

Starting small may put your business at a disadvantage. A bootstrapped business may miss out on bulk purchasing discounts, the ability to invest in efficiency-improving technology, or be unable to quickly scale operations to meet increasing demand. 

For example, a growing service business might need to turn down larger contracts simply because it lacks the working capital to hire additional staff, get the necessary equipment, or even pay for a required surety bond. Better-funded competitors may capture market share that could have been theirs.

And, of course, the personal financial risk can’t be overlooked. When entrepreneurs invest their savings into a business, they’re concentrating their financial exposure rather than diversifying it.

In business, “runway” refers to how long a business can operate before it runs out of money, whether that’s cash, investments or borrowed funds. 

While it’s technically possible to start some businesses with as little as a few hundred dollars, particularly in the service sector, undercapitalization remains one of the leading causes of business failures. 

Success requires not just enough money to open the doors, but enough resources to keep it going until it is consistently profitable.

Strategies for Bootstrapping

If you don’t want to take on debt or investment capital, you’ll either need a healthy chunk of your own money, or you’ll need to bootstrap your own business. 

Here are 13 business ideas you may be able to start without a lot of money:

1. Virtual Assistant Services

Startup costs: $100-200 (computer and internet you likely already have)

Initial needs: Basic project management tools, professional email account

Target first-year revenue potential: $30,000-60,000

Key advantage: Wide variety of types of services to start. 

2. Social Media Management

Startup costs: $150-300

Initial needs: Scheduling tools, basic graphic design software

Target first-year revenue potential: $40,000-75,000

Key advantage: Growing demand for social media marketing. 

3. Online Tutoring/Teaching

Startup costs: $200-400

Initial needs: Video conferencing subscription, teaching materials

Target first-year revenue potential: $25,000-50,000

Key advantage: Flexible schedule (including evenings and weekends). 

4. Freelance Writing/Content Creation

Startup costs: $100-200

Initial needs: Writing software, grammar checking tools

Target first-year revenue potential: $20,000-40,000

Key advantage: Content marketing continues to grow. 

5. Cleaning Service

Startup costs: $300-500

Initial needs: Basic cleaning supplies, liability insurance

Target first-year revenue potential: $30,000-60,000

Key advantage: Ongoing demand for reliable service providers. 

6. Mobile Car Detailing

Startup costs: $500-800

Initial needs: Basic detailing supplies

Portable vacuum/buffer

Transportation

Mobile payment system

Target first-year revenue potential: $35,000-65,000

Key advantage: Can build recurring client base in affluent areas

7. Home Organization Service

Startup costs: $300-1200

Initial needs: Basic organizing tools

Liability insurance

Storage solution samples

Target first-year revenue potential: $20,000-45,000

Key advantage: Growing demand due to “decluttering” trends

8. Window Washing / Pressure Washing

Startup costs: $500-1000

Initial needs: Basic equipment

Cleaning supplies

Target first-year revenue potential: $30,000-60,000

Key advantage: Can start solo and scale with contractors

9. Personal chef/meal prep service

Startup costs: $600-1,000

Initial needs: Food handler certification

Basic cooking equipment

Food storage containers

Liability insurance

Target first-year revenue potential: $40,000-75,000

Key advantage: Demand driven by healthy eating trends and aging population. 

10. Pet Sitting/Dog Walking

Startup costs: $200-400

Initial needs: Insurance, basic pet supplies, scheduling software

Target first-year revenue potential: $25,000-45,000

Key advantage: Pet services are one of the fastest growing business segments. 

11. Bookkeeping Services

Startup costs: $300-600

Initial needs: Accounting software, professional certification

Target first-year revenue potential: $40,000-80,000

Key advantage: Small business formations rising. 

12. Website Design 

Startup costs: $500-800

Initial needs: Design software, website hosting account

Target first-year revenue potential: $35,000-70,000

Key advantage: Hundreds of thousands of new websites are created every day. 

13. Online reselling

Startup costs: $500-1,000

Initial needs: Initial inventory, packaging supplies

Target first-year revenue potential: $20,000-40,000

Key advantage: Retail online sales continue to grow, to exceed over $4 trillion per year.

You may be able to start one of these businesses as a side hustle, so you can build your business while still earning a full-time income. 

When to Consider External Financing and How to Get it at Every Level

Before you even consider borrowing, make sure you are clear about how much money you need, and how you plan to use those funds. 

Whether you start a business with $500, $50,000 or $500,000, create a business plan. Even a basic one-page business plan can help you to think through your business model (how will you make money?) and other key fundamentals of your business, such as your target market, pricing, and how much it will take to break even and then turn a profit. 

With that information, you can think about financing options. If you don’t have enough personal savings or connection to investors, you may want to consider borrowing. 

It can be hard for new businesses to get a small business loan, but not impossible. Look into: 

Business credit cards

A business credit card is one of the most accessible types of financing for a new business owner, provided you have good credit and sufficient income. Typically, though, income doesn’t have to come from the business—household income can suffice. 

Lines of credit

A line of credit can be helpful for short-term financing. If you get approved, you’ll be able to borrow against the credit line as needed. New business owners will likely have to offer a personal guarantee, though, and interest rates may be high. 

Crowdfunding 

This funding option is available to brand new businesses, especially those that have a strong support network or very creative ideas. The main types of crowdfunding for small business are loan-based crowdfunding (e.g. Kiva, Honeycomb Credit), rewards-based crowdfunding (e.g. Kickstarter, Indiegogo),  and investment-based crowdfunding (e.g. StartEngine, WeFunder). 

SBA Loans

The U.S. Small Business Administration offers an extensive SBA loan program including 7(a) loans, SBA Microloans, Export loans and more. The SBA approves lenders who make these loans, and offers a guaranty to the lender. Repayment terms are often favorable, but you typically do need a good personal credit score to qualify. 

Microloans

Microloans are small loans (as little as $500 to as much as $50,000). Typically non-profit lenders, such as Community Development Financial Institutions (CDFIs) make these loans with the goal of helping support small business growth. 

Small business grants

If your business can secure a small business grant, you won’t have to repay the funds. Grants can be very competitive though, and it can be hard to find grants to start a business. 

Learn more: Small Business Grants: Free Money for Your Business

The Bottom Line: Starting a Small Business Without a Loan

There’s no single way to start a successful business. Some entrepreneurs take big risks, while others are more cautious. Starting a business without loans is challenging but often can be achievable if you’re willing to make it happen. 

 Either approach takes hard work; you have to decide which path will get you where you want to be in a way that works best for you. 

Regardless of how you decide to grow your business, Nav is here to help. Get tools to establish a business credit history, track and manage your cash flow, and build a financially healthy business.