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How to start a business with zero capital

Published on 2nd January 2019 - Last update on 11th April 2020

Could your idea make it big? Every year, more and more Brits are deciding to pursue their dreams and break away from the conventional route, establishing their own businesses. Of course, being excited about what the future may bring is great, but in order to drive your idea forward and ensure a long-lasting future, you need a well thought out business plan and access to sufficient amounts of capital. However, if you’ve got zero capital available it can feel like the odds are stacked against you. Yet if your idea is to reach fruition, it’s a pitfall that you must overcome. So if you’re wondering how to a start a business with zero capital, here are some ways you can acquire the support you need to go forward.

1. Keep your existing job for now

Although it can be tempting to just pack up and leave your existing employment - don’t. At this stage, you’re simply experimenting with your business idea and are still reliant upon a steady income stream. Of course, this means that you’ll be working longer hours, but you need to be realistic and acknowledge that only 20% of the new business’ make it to their 5th year. So deciding to jump ship right now could be a costly mistake, especially if your business folds. Besides, by still being employed you’ll retain your job security and can use the income to support the foundations for your startup.

Looking to develop your new business? Need access to additional funds? Apply for New Business Finance or learn more about how your business could benefit.

2. Develop your idea

Having a great idea is merely the first step. It’s up to you to take it from concept to something that carries more weight. Ultimately, this all comes down to planning, expanding upon what exactly your idea means now and what it could mean given time. As such, when considering how you can develop your idea, some of the questions you need to ask yourself are:

  • What is the unique sell of points of your goods and/or services?
  • Who is your target audience?
  • What value does your goods and/or services have to offer?
  • Do customers really want what you’re offering?

3. Research and analyse the market

Whilst fleshing out what makes your idea so appealing to customers and why it could generate a reliable income, you also need to carry out in-depth analysis of the market in order to put your theories to the test. As well as identifying who makes up your target demographic, it’s vital for your business’ long-term sustainability that you fully appreciate:

  • What’s currently trending among your target audience
  • How much competition you’ll be facing
  • Whether your idea could be reproduced by your competitors
  • What challenges you can expect to encounter
  • How the market may change in the future

Therefore, if you’re to make fully informed decisions and develop a workable business plan, understanding every aspect of your market is crucial. After all, only with the facts to can you safeguard your business and find a viable solution to any obstacles standing in your way.

4. Understand your business’ capital requirements

In order to establish the groundwork necessary to begin offering goods and/or services, you need to fully appreciate the capital requirements of your start-up business during its first months. These are essentially the mandatory costs of developing your internal infrastructure and maintaining day-to-day operations so that you can begin trading, paving the first steps toward achieving your vision. Naturally, this varies according to the type of business you’re hoping to establish, yet could involve anything from office rent, licenses/permits, start-up inventory, equipment purchases and product development to opening day marketing. However, if you’re starting a business with zero capital, having to support these costs can be daunting. But, providing you know where to look, you don’t need to carry them alone.

5. Explore your start-up funding options

Despite having an idea you’re passionate about, the fact that you’re starting up with zero capital can feel like a pitfall in itself. Yet rather than throw in the towel before you’ve got started, know that there are plenty of external funding opportunities available designed specifically for supporting UK start-ups. As such, having no capital needn’t be a thorn in your side, providing you know where to look. However, to help get the ball rolling, some of the opportunities on offer to you are:

Grants

Grants are a popular choice for many entrepreneurs seeking to establish a start-up since they are often viewed as a source of free money. However, this also makes them quite difficult to acquire on account of the competition you’ll be up against on applying. Grant schemes are often run by the government, local authorities, sector-specific organisations, Growth Hubs and private individuals for a particular purpose. As such, depending on the terms of the scheme, you could gain funds to help support anything from new equipment purchases, eco-friendly vehicles, research and development to working capital expenses. However, you’ll need to check whether your business qualifies, plus you may need to match the amount of funding on offer using your own capital, which could be an issue.

Crowdfunding

On the other hand, you could raise all of the funds your start-up needs by applying for Crowdfunding. Simply put, Crowdfunding (or Investment Crowdfunding) allows you to appeal directly to 3rd party investors across an online platform such as Crowdcube, Kickstarter and iFundWomen. As such, you’ll be expected to implement and manage a marketing campaign using blogs, vlogs, posters to online discussions promoting the benefits of investing in your start-up. However, although there’s no limit to how much you could raise, funding comes at the expense of equity (shares) in your business.

Peer-to-Peer (P2P) Lending

If you’d rather avoid the prospect of giving away equity, you might want to consider applying for Peer-to-Peer Lending instead, which is a type of short-term lending agreement. As with Crowdfunding, you’re also expected to appeal directly to investors, but instead of offering up equity, investors will join a panel and combine their funds to form a lump sum. These funds are then gradually repaid using a Fixed Monthly Repayment Scheme across an agreed term of up to 3 years, plus interest. However, some Peer-to-Peer platforms may offer agreements extending up to 5 years.  

Need help supporting your small business?

Starting a business with zero capital isn’t an easy task to overcome, and can be daunting at the very least. But rather than letting this deter you from pursuing your vision, there are plenty of funding opportunities available that could support your finances and, as your business continues to develop, you may become eligible for a new generation of business finance solutions as well, thanks to the Alternative Finance industry. Whether you are needing the finance to start a laundry business or you're looking at starting an engineering consultancy business, Rangewell can support your start-up goals. Therefore, there’s no reason why you don’t stand every chance of succeeding, providing you have access to all the necessary support.

At Rangewell, we’re an Access to Finance specialist who has mapped over 400 lenders to offer SME owners an overview of more than 23,000 business finance products. Our services are free to use and we’ll also guide you through the entire application process. So if you’re looking to take your business to the next level but need access to additional funds, apply for New Business Finance today or find out more with Rangewell.


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David Harrison

David Harrison

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