+1 to what Chris has mentioned above. In addition, I will add this. I'm not saying that you can't start a business on a small budget, but keep in mind that you will want to have a business plan together.
Note: these questions are not meant to discourage you but to save you some heart ache. Starting a photography business isn't as easy as just buying a dslr camera and lenses and then lining up people to shoot.
I personally would want to have at least a back up body, and possibly lenses. When it comes to lighting, I wouldn't get the cheap stuff. In most cases, you will have to replace it often enough that it makes more sense to spend the money for better quality right off the bat.
Since you are on a small budget, why do you need a studio just staring out? It's very easy to start out using sunlight and the outdoors, (In this instance, you could most of the time use the equipment you have and add a reflector as a great start) this would save money and space. I realize that this limits you when it is snowing or raining but if you absolutely have to at that point is there a possibility of renting space for that one off. Or if you have a room with a large window, you could use it and the reflector mentioned above.