How to fund a small business without loans

Funding a small business without loan is not only difficult these days, it is one of the main reasons most young people have withdrawn from their businesses. Especially, around the developing world.

As I type this, I know of a good number of small business ideas with good prospects that have been abandoned or about to be abandoned, because there’s no money to get started.

And this is really sad. I mean, sourcing for funds to start your small business is hard. Especially if you’re a young hustler doing your stuff part time like a student for instance.

In the first place, most of the time you will be struggling with approval issues. Your idea would most likely not be convincing to the people who are supposed to fund it. People won’t believe in your idea. I mean even the people close to you…

In most cases, the people around you will not see the viability of your idea. Considering that these are actually supposed to be your first port of call for start up funds and loans.

This makes the whole idea of approaching your family and friends for funding, very discouraging most times.

As a matter of fact, you may expect that they will someday believe in you and your ideas, so you decide to keep explaining yourself. After a while you get tired and out of frustration decide to go out on your own.

But out there, there’s no money and no real hope of getting started.

So you ask yourself this question repeatedly, how can I raise funds for my small business without getting loans?

Alright. Let me answer your question.

Like I said earlier, sometimes it can be really difficult raising funds for your business without loans.

So, instead of bothering yourself trying to explain your business to others, why not try a different approach?

Below are top strategies to start your business without loan or collateral

Here’s how to fund your small business without loans based, on personal experience.


You’ve probably heard about bootstrapping a business.

In a small business context, bootstrapping is simply about starting a business with your own money (say savings) instead of sourcing money from investors.

And this is one of the best ways of raising funds for your small business without loans.

When I started my online business, I actually had to go this way. I bootstrapped my funds.

This money came from savings I made for months. (Don’t worry, it wasn’t a very big sum anyway).

As a university student, I remember there were days I had to save my pocket money, skip some meals because I needed money for a business website. That was how it started.

Of course no one actually saw any break through in what I was doing. So how could I convince them to support me.

In fact; at a point, I was tired of explaining myself. Tired of trying to get approval from people around me so I decided to launch out with my savings and save myself the stress.

As a micro or start up entrepreneur, your number one source of funds is yourself. Forget about the people around you.

Most of them may not support you either because they are skeptical or they don’t understand you. Some of people may even steal your idea from you, if it’s not patented.

The ones that may end up supporting you could become your worst critics if your business ever fails. So, starting with your own savings could be about one of your surest ways to save yourself some issues.

Now, i want you to note this; when my first business model failed and my website got deleted, I felt completely disappointed. I felt like a failure and what have you.

But you know what?

The fact that I bootstrapped my business helped me in getting back on my feet.

The fact I didn’t have people to account to or people who will criticize and make me lose confidence in what i was doing explain helped me to get back on my feet even faster.

When I failed, I knew the number one person I failed was myself. And the few people that believed in me.

This helped me get back to work. Without undue pressure from having to pay up debts, be in someone’s good books or take time to proof that they should believe in me again.

So, when i fell, i had to get up, dust my self and get back on my feet. Only bootstrapping can help you to do this pretty easily. Otherwise, things could get really messy.

So bootstrapping is still one of the surest ways to raise funds for your business if you don’t want to go into loan.

Work Part time

Another easy way to start a business in Nigeria or anywhere without a loan is to run your business on a part time.

Running your business on part time will be very beneficial for you, if you’re currently working or engaged in other form of employment.

For instance, you can use the income generated from your current job, to cater for your needs while also funding your business with it.

As the business continues to grow and generate profit, you can resign or leave your current employment after you’re confident enough that your business is well able to fund itself and also sustain your own financial needs.

This particular model of fund raising has helped a lot of small business owners who can push their business either after working hours or during weekends while keeping their paid employment on week days.

Re-invest your profits

If you want to raise funds for your small business without capital, re-investing your profits is one of the easiest way to go about that.

This strategy will work pretty well both for a service based and product based businesses. Instead of sitting and waiting for loans, start re-investing all your profits into the business.

For this to be successful however, you may actually have to forego any other thing you would have intended to do with your business profits. And then focus on using whatever gains you make to develop the business.

This strategy does work for most businesses but it doesn’t work for everyone unless you are very disciplined when it comes to financial management.

Also, if you’re a struggling or “hungry” entrepreneur without any other viable source of income, then you may have to avoid this completely.

Team up with other creatives

OK so you’re a graphic designer and you know a website designer that would need your services right?

You two can get into an arrangement where you design a set number of graphics and have him set up a website for you in return.

Same thing goes with a video editor or photographer that knows a social media influencer.

You can take up their videos or pictures, work on them and get exposure in return through their platform.

It’s a simple win win situation here. More like a trade by barter situation where you use what you have, to get what you want.

Although this might not exactly get you all the funding you need, it can save you a lot of expenses while you focus your income on your most important business needs

The major challenge with this idea is that majority of businesses using this approach are usually service based businesses. If you’re into a product business, you can also check out if this strategy can work for you.

Start with a low cost Idea

Let’s say you want to deal in mobile phones for instance and your budget cannot really source that; instead of going to get loans with high interest rates, you can work on starting with a low cost alternative and then save up.

So, instead of mobile phones, you can start with phone accessories and gadgets (if that’s affordable for your budget) then expand to include mobile phones, as your business continues to generate profits.

Alternatively, let’s say you have certain set sell-able skills, (For instance you’re a writer, designer etc) and you want to start a service based business

As someone with a flair for writing and some good social media skills, instead of waiting for money to launch a copy writing website, you can start with social media management as your part time business.

With this, you may not really need a website. All you need do is put your social media profile in shape.

After that, reach out to people who are not too familiar with social media or people who are too busy to manage their handles, market your services to them and get positioned to start working.

Once they are ready to work with you, you can use your writing skills to help them and get paid for your services.

With this, you don’t only save enough funds for your business, you evolve a brand for yourself at the same time.

At the point you’ve made enough savings from this, you can then go start up your main hustle.

Join Contributions

A susu is a form of rotating savings or informal credit facility where the members contribute a fixed amount of money to a bulk sum, from which they can take turns to get funding, at intervals.

You can gather or join a set of like-minded people where you guys contribute a fixed amount of money individually.

With such arrangement, at a set time, one contributor takes from the whole contribution to cater for their needs, only to pay back little by little as the cycle of contribution continues.

With contributions like this, you don’t need collateral but you get free loans to start your business while paying back in bits as the cycle of contributions continue.

What is important here is gathering like-minded people. And being able to enforce consistent contributions.

Get Investors/Partners

Getting investors or business partners is one other option you can use to raise funds for your business without loans.

While I do not believe that everyone is interested in your business or idea, there might be one or two persons out there, with funds that can be invested in your business if only you can “sell” the idea to them.

So, instead of worrying over who’s interested or who’s not interested in your idea, you can as well start pitching your ideas to potential investors.

Depending on the size of your business, to get started, you can start with mapping out a partnership or investment proposal. Then pitch your ideas to potential investors.

Tell them about your business, the prospect and the benefit they stand to gain by investing or partnering with you, in no uncertain terms.

To make things even bigger, you can approach venture capitalists and other angel investors with cash, willing to invest in your business. Although chances of getting through with the latter two can be slim, there’s nothing wrong in trying.

Of course, when it comes to looking for investors this way, a lot of small businesses usually believe they may not find one and i understand this completely. But at the same time, a lot of other businesses are still pitching and getting investors.

So, instead of forgetting about the idea, before pitching a potential investor or partner, find out what works, get your acts together and go ahead to give it a shot.

While working on getting investors for your business, i want you to also understand the cons that comes with such approach to fund raising.

Same approach goes for partnerships. You can get into strategic partnership with individuals or businesses, pull your resources together and fund your business while sharing your profits and expenses.

Personally, i prefer partnerships over getting angel investors or venture capitalists, especially for micro businesses.

Use Crowdfunding

Over the years, crowd funding and online competitions have become a lifesaver for many small businesses, offering them a chance to raise funds without losing equity in most cases.

Although crowdfunding is still under-developed in most developing countries, a lot of small businesses have generated funds via crowd funding, in developed countries. And a few developing countries in some areas are definitely catching up.

One thing you must have at the back of your mind while exploring funding via crowd sourcing is that for your campaign to be successful, you will need to have a good understanding of the effort you need to put in and ultimately, key factors that’s worked for other successful campaigns.

Now, besides crowd funding another way to raise funds for your business without loans is to apply and join online funding contests.

For example, there are also a handful of government funded and privately funded opportunities out there. All you’ll need is find out the one that’s worth putting in your effort into.

Be careful not to waste your lean resources and time on opportunities you don’t have much potentials with.

Alright. So here’s where we’ll draw the conclusions on how to fund a small business without loans.

The good news I have to tell you is that you don’t have to own the whole money in the world before you launch your business idea.

As I write this part my heart really goes out to those younger entrepreneurs with good ideas who lack funds to get started. Trust me, I’ve been here. A lot of successful businesses today have had to go through this as well.

The thing I want to say to you at this point is that are so many ways to fund your business without getting loans. Look up this ideas, study and understand them then find one that’s suitable for your business and get started with them.

Want more ideas on how to start and grow your business online? 

Let’s talk. 

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    Victor Winners

    Victor Winners

    Award winning Blogger, Author, Web Developer, Senior Digital Strategist and Founder of Africa's most widely read blog on Content Marketing and Digital Strategy, VictorWinners.Com.Named as one of the top 50 design influencers globally, since 2014; Victor Winners has helped over 2 million readers to understand and use digital technology to transform their lives and businesses.

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