Why Is It So Hard to Start a Business from a Low-Income Background?

Starting a business is tough for anyone. But for people from lower socioeconomic backgrounds, the barriers are often much higher and quite daunting. Academic research has shown that systemic disadvantages—like lack of funding, confidence, and support—can block the path to entrepreneurship before it even begins.

At Canopy Community, we believe everyone deserves a fair shot at building a business. So we reviewed recent academic papers to understand the biggest challenges and how we might help overcome them. Here are the three most common barriers researchers identified—and what we think we can do about them.

1. Access to Capital and Financial Risk

The most frequently cited barrier is a lack of access to early-stage funding. People from low-income backgrounds often don’t have savings or assets to invest, and they may not have family or networks to call on for help.

Even when funding options exist—like government-backed loans or grants—there’s a fear of taking on debt, especially if it puts benefits or basic living costs at risk. The 2023 study from the University of Exeter notes how “fear of losing welfare support” can discourage people from even trying.

Solution: We need more inclusive funding models. Microfinance, income-contingent repayment loans, and community grants can help reduce risk. Support should also include guidance on how starting a business may impact tax or benefits so founders can make informed decisions.

Asynchronous learning like the Canopy course on SEIS fundraising provide an entry point for anyone looking to raise funds for their new idea.  These courses along with our Virtual Incubation program & Founder acceleration programmes can be accessed on both a paid and scholarship basis.  They are also available through gateway institutions like our partner City St Georges University.  By manifesto  we strive to deliver everything we do with as few barriers or constraints and possible, and to deliver the same experience for all members of the community.  Demo Night is a perfect example of this.   Through our partners and sponsorship we are able to off an all free ticket experience, which is catered, and provides an open platform for any Founder open to taking the stage to get help, support and feedback from critical friends.

2. Confidence and Self-Belief

Another major barrier is mindset. Research by SAGE Journals (2023) highlights how individuals from lower social classes often score lower on entrepreneurial self-efficacy—they simply don’t see themselves as the type of person who starts a business.

This is made worse by a lack of role models. If no one in your community has built a business, it’s harder to imagine yourself doing it. Many feel they won’t be taken seriously or that they’re “not the kind of person” who gets funded.

Solution: Community and mentoring matter. Initiatives that connect aspiring entrepreneurs with mentors from similar backgrounds can change the story. Events like our Canopy Campfires, podcasts, demo nights and peer-learning groups allow founders to see people like them succeeding—and realise they can too.

3. Knowledge Gaps and Limited Networks

It’s not just money and mindset. Many potential founders struggle with the practical side of launching a startup—because they’ve never been exposed to it.

A 2018 literature review from the Enterprise Research Centre showed that underrepresented founders often lack access to business know-how, professional networks, and even internet access in some cases. This makes it harder to validate ideas, find customers, or understand how to register a company or write a business plan.

Solution: Startup education must be inclusive and practical. From free workshops to mobile-friendly video content, there are low-cost ways to close the knowledge gap. At Canopy, we focus on building peer networks so knowledge gets shared, not locked up.  The Canopy Campfire is a great example of an event that helps the community to level up its knowledge, share ways of doing things and helps everyone to gain wisdom.

Reflections

From reviewing these sources we can see that Canopy is already doing a number of things to help remove and reduce barriers to entrepreneurship but we've also started to think about how we can adapt and bring to life more things.

We recognise that this is a journey, and we've committed to setting strategic goals each year to directly support initiatives that bring down the barriers and help ever increased participation in entrepreneurship.

Final Thoughts

Entrepreneurship can be a fabulous way for anyone, from any background, to create their own future.  But for them to thrive our ecosystem needs to remove and dismantle different barriers for different Founders at different times. The research we've found shows clearly that low-income founders face extra challenges around money, mindset, and networks.

But it also shows us that these barriers aren’t permanent. With smart funding, good role models, and better access to knowledge, we can open up entrepreneurship to everyone.

At Canopy Community, we’re building a platform where founders at all stages can connect, learn, and grow together. From wherever you are starting you don’t have to do it alone. Join us.  Bring your wisdom to share, and embrace the opportunity to learn from others.  We are here to help you Follow Your Dreams.

References

Come to the next demo night and get involved with the community https://www.canopy.community/demo-night. Bring your own magic and share in others.