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Key takeaways
Without cash on hand, you may not be able to get just any business loan. Most lenders want to see a flow of revenue and profit to consider you for a loan. But some types of business loans and alternative financing can help borrowers get the funds they need without revenue or funds.
Business loans for startups with no money
Financing a business with no money won’t be an easy task, but there are options. From business loans and credit cards to grants and venture capital, here are your best financing options.
Microloans
A microloan has a maximum loan amount much smaller than typical term loans. There’s no standard for how large these loans can be, but the SBA microloan goes up to $50,000.
Microloans are usually offered through nonprofit, community-based lenders or as specialized programs for underserved businesses. These loans typically have low eligibility requirements and may not require a minimum credit score or annual revenue. But they may require business owners to go through training or one-on-one mentoring to help the business succeed.
Examples of microlenders include:
- Accion Opportunity Fund: Offers loans up to $250,000 with simple interest rates starting at 8.49 percent.
- Kiva: This peer-to-peer lending platform lets you get loans up to $15,000 and doesn’t charge interest.
Business lines of credit
Since a business line of credit is revolving, it allows you to use funds continuously. The lender will give you a set credit limit, which is the maximum amount that you can borrow. You can borrow at any time during the draw period, and your credit limit replenishes as you make repayments.
Repayments may be weekly or monthly, with interest only on the amount that you borrow.
Whether or not you need money upfront will depend on the lender. Some lenders charge an origination fee or a draw fee when you make a withdrawal. Many lines of credit also have a minimum revenue requirement, like $100,000.
Business credit cards
Many business owners have one or more business credit cards in their wallets, especially first-time business owners needing quick cash. Unlike a business loan, you’re not required to have any money upfront for most cards.
The best business credit cards typically require good-to-excellent credit. But some, such as the Spark 1% Classic, are open to fair credit borrowers. Some cards also come with additional perks like free employee cards, discounts and the chance to earn cash back or travel rewards.
You can use a business credit card for short-term expenses, and you won’t have to pay it off immediately. When the bill becomes due, you can pay it in full or make the minimum payment.
That said, if you pay in full each month, you can avoid interest charges. This makes business credit cards a potentially low-cost way to build business credit and responsibly manage your business finances. Be sure to avoid overspending with your business credit card, as it can quickly lead to a cycle of debt.
Equipment loans
An equipment loan is a term loan that’s secured by the commercial equipment you’re buying with the loan funds. Because it’s secured, it’s easier to qualify for than other business loans. Lenders may have lower requirements, such as an annual revenue of $100,000 or less. It’s also possible to get 100 percent financing, so you don’t have to put a down payment on the equipment.
Invoice financing
Invoice financing is a type of accounts receivable financing using your unpaid invoices. In order for your business to qualify, financing companies evaluate your clients’ payment histories and invoices. The company then typically advances up to 90 percent of the invoice amount for you to use any way you please.
Payment structures differ from company to company, but most require you to repay as your clients pay you. But fees can be high. Financing companies often charge a one-time fee as a percentage of total invoices, while others add an additional percentage for each week the invoice stays outstanding.
Merchant cash advances
A merchant cash advance helps you get funding based on past credit and debit card sales. You won’t need any money upfront. Payments are either a percentage of your sales or a fixed payment. But for most MCAs, you’ll have an aggressive daily or weekly repayment schedule.
How to get a small business loan with no money or revenue
To get a small business loan with no revenue, you’ll need to show that you have the ability to repay the loan. Here are some tips to help you get approved.
Research lender requirements
Every lender sets different lending requirements that it approves for business loans. Whether you’re a brand new business or don’t have any available capital, check to see if your business at least meets the minimum criteria.
These are common lender requirements:
| Minimum requirements | Online lenders | Traditional banks and credit unions |
|---|---|---|
| Time in business | Six months to two years | Two years |
| Personal credit score | Around 600, but as low as 500 | 670 or higher |
| Annual revenue | $15,000 to $250,000 | $100,000 to $250,000 |
Lenders that accept low or no revenue
Most lenders require borrowers to have consistent revenue being deposited in a business checking account. While banks and credit unions typically require high amounts, a few online and alternative lenders work with businesses with little-to-no money.
| Lender | Minimum required revenue | Types of loan |
|---|---|---|
| Fundible | $100,000 | Bridge loans, Equipment loans, Invoice financing, Term loans |
| Kiva | No requirement | Microloans up to $15,000 |
| Paypal | $15,000 to $33,300, depending on loan | Term and working capital loan |
Pay attention to cash flow and assets
Most lenders need you to show a current flow of revenue or capital to get a loan. But some loans look beyond cash flow. Accounts receivable financing lets you use unpaid invoices to get funding.
Meanwhile, secured business loans help startup businesses and business owners with bad credit get a loan with no down payment because they’re guaranteed by business assets. Lenders are typically more willing to take on 100 percent financing because they can seize the collateral or assets to repay the loan if you fail to make payments.
Know how much loan you can afford
No matter how much a lender approves for you to borrow, make sure the loan payments fit into your monthly business budget. You can use a business loan calculator to estimate the monthly payments and total interest you’ll pay on startup business loans with no revenue.
You can also see if loan payments will be manageable by looking at your estimated debt payments compared to revenue. Lenders often use one or more of the following ratios to see if you’re eligible for funding:
- Debt-to-income ratio(DTI). Your DTI is calculated by dividing your monthly debt payments by monthly gross income. A DTI of 36 percent or lower is considered healthy, but some lenders may accept higher.
- Debt service coverage ratio (DSCR). The DSCR uses your net revenue or EBITDA divided by monthly debt payments. Most lenders want to see a DSCR of 1.25 or higher.
Should you get a business loan with no money?
The choice between getting a business loan with no money or seeking other financing options depends on how you’re going to use the funds and whether you can wait. In most cases, you can get more favorable loan offers if you have a steady revenue stream and money to put down for the loan.
But if you need to cover an unexpected cost or capitalize on a growth opportunity, getting a loan with no money may work well for your business. You just need a plan for making loan repayments so that you can effectively manage your business loan.
When to get a business loan with no money
There are several reasons why a business might need to obtain a loan with no money, including:
- Covering startup costs: When starting a business, a loan may be necessary to cover initial expenses such as rent, equipment, inventory and employee wages.
- Expanding the business: A small business loan can help finance costs associated with growth, such as new inventory, additional staff or a larger office space.
- Paying unexpected expenses: Unexpected expenses can arise at any time, and a small business loan can provide the necessary funds without straining cash flow.
- Taking advantage of an opportunity: You may need funds to take hold of an opportunity to grow the business through a new market, product or business acquisition.
- Debt consolidation: Consolidating high-interest debt into a small business loan with a lower interest rate can help make monthly payments more manageable.
When not to get a business loan with no money
You might not be in the best spot to get a business loan with no money on hand in these scenarios:
- Weak revenue: If your business doesn’t have strong revenue or you’re a startup without a solid plan for revenue, you may want to postpone debt financing until you start generating income. You can look to other types of funding for your startup.
- Using for operational expenses: It’s one thing to need financing to get through a cash flow gap during a slow season or until invoices get paid. But if you need money to cover daily operational expenses regularly, you may have a cash flow issue that you need to address without going into debt.
- Payments don’t fit in your budget: No matter how your business finances look or how good your credit history is, if you can’t fit the loan repayments into your budget, you can’t afford a business loan.
- You can wait: If you don’t need funding right away, you may want to wait to apply for a business loan when you have money to use as a down payment. You may be able to get lower interest rates, better loan terms or a lower payment by putting money down.
Business loan alternatives for low-revenue businesses
Traditional lenders will likely require the business to have revenue to give you a business loan. But you can find unconventional funding options if you need cash for your business but can’t meet lenders’ revenue requirements.
- Angel investor: An angel investor is an individual willing to invest in your business in exchange for equity. This investor typically offers mentorship, decision-making and connections to others in the industry to help your business succeed.
- Venture capital: Venture capital (VC) firms are a startup financing option. Venture capital firms typically invest in businesses with high potential for growth and require that the investor become a part owner, gaining equity. VC firms will review your business plan and valuation to determine if your business is worth the investment.
- Crowdfunding: Crowdfunding allows individuals like friends, family or investors to invest in your business. The crowdfunding campaign may involve repaying the investors or offering gifts or equity in your business.
- Business grants: A business grant is an ideal option if you have no money because it doesn’t have to be repaid. Grants allow you the chance to get financing without taking on the burden of loan repayments. But these attractive features make grants highly competitive and hard to obtain.
Bankrate tip
For more information on business grants, check out any of the following guides:
- Grants for minorities
- Grants for veterans
- Grants for women
Bottom line
Whether it’s for starting a business, expanding or meeting unexpected expenses, small business loans can provide financial support if managed wisely. You may need to get creative with the types of funding at your disposal, but it’s possible to get a small business loan with no money. The key is to consider all available resources, make use of your business assets and have a solid business plan to show you can repay the money you’re borrowing.
Frequently asked questions
Cash flow refers to the money flowing in and out of a business. Business lenders prioritize cash flow because it demonstrates whether a business can generate enough income to repay existing debts and handle a new loan.
Most SBA loan programs require a down payment, typically ranging from 10 percent to 30 percent, based on the loan type. But some SBA loans, including CAPLines and disaster loans, don’t have a down payment requirement.
While most lenders require a credit check to determine your eligibility, some may overlook this requirement or do a soft credit check. But if you wish to avoid a credit check altogether, alternative business financing options, such as crowdfunding platforms like Kiva, may be an option.
Lenders typically prefer businesses with solid cash flow, as they’re considered more reliable borrowers. If you’re looking for a business loan with no money, research lenders with relaxed eligibility requirements and be ready to provide collateral to secure the loan. You’ll also want to make sure you have a solid business plan to show you have a method for generating revenue and repaying debts.
