It can take time — sometimes years — to get your business off the ground and turning a profit. This limitation can make certain business loans out of reach for many borrowers. However, a few business financing options might make sense for small businesses looking to grow.
Business loans often have fairly strict criteria to qualify. For example, you may need at least two years in business or meet minimum revenue requirements just to be eligible to apply.
These requirements mean some business loans aren’t an option if you’re a newer business with little cash or no revenue. Still, some loan types and other financing options might work for now.
However, most business funding options for startups with no money come with higher rates and fees. As you become more established, business loans should become more affordable.
If you’ve recently started a business, you’ve likely invested all your money into it, so you may not have a large savings to fall back on. And as a startup, your business may not be earning much revenue yet from paying customers or clients.
If you don’t have any money personally, and your business isn’t generating much revenue yet, those are two major stumbling blocks to getting traditional business loans. That’s why you’ll have to look outside the box to get financing to grow your business.
Finding business financing when you don’t have any money can be challenging. You’ll still need to meet other requirements, you’ll likely pay higher rates than more established businesses and you may need to sign a personal guarantee, but there are a few options.
Microloans are small business loans — usually up to $50,000 — and are typically awarded to startups, women- or minority-owned businesses or businesses in underserved areas. These types of loans are usually offered through non-profit, community-based lenders or government agencies like the Small Business Administration (SBA). Microloans might be the right option if you don’t have capital or revenues and can’t find business financing elsewhere.
Lack of revenue or money may not be as big of an issue with equipment financing because the equipment is used as collateral for the loan. Secured business loans are usually easier to qualify for than unsecured loans, making them a more viable option for startups or businesses with no cash. Some equipment loan lenders require a downpayment, but others may finance up to 100% of the loan.
If you’re short on cash but have unpaid invoices, you may be able to get a loan based on the value of your outstanding accounts receivables. With invoice financing, the financing company fronts you a lump sum, which you repay, plus fees, as your customers pay their bills.
You won’t need to put any money down, but the financing firm needs to confirm the invoices are valid and that your customers are creditworthy. Also, it can be one of the more expensive forms of business funding.
Invoice factoring is similar to invoice financing in that you receive funding based on unpaid invoices, but instead of taking out a loan, you sell your invoices to a third-party firm that takes over the collection process. Invoice factoring is another option for businesses that don’t have cash but are expecting incoming revenue.
The factoring company fronts you up to 90% of the value of your invoices and then — once the customer pays — sends you the difference minus its fee. Like invoice financing, factoring can be pretty expensive, and you also lose control of your invoices, which may cause a disconnect with your customers.
A merchant cash advance (MCA) might be a solution if you don’t have extra cash but have a significant influx of debit and credit card sales. It’s kind of like invoice financing or factoring, except that you take out an advance based on your future sales and repay it as money comes in.
A merchant cash advance is another expensive form of financing, and you typically have to repay the advance in daily or weekly installments, which can be pretty aggressive. It’s also not suitable for many types of businesses, although if you’re in retail, it might work for you.
More like a business loan than a credit card, a business line of credit can give you access to cash needed for startup costs, expansion or other business expenses. However, you might need a little money up front because some lenders that offer lines of credit may charge origination or other fees. You may also need to meet minimum revenue requirements.
With a good credit score, a business credit card might be one of the easier types of business funding to qualify for, and you won’t have to put any money down. It can help you meet short-term business expenses, and — if needed — you only have to make the minimum payment to get through a lean period.
Plus, you only have to pay interest on what you borrow, unlike most business loans. And many business credit cards come with additional perks, like rewards points or discounts. It’s also a good way to build your business credit, which can help you qualify for other business loans down the road.
If you’re having trouble qualifying for business financing, you may need to take some extra steps.
It’s typically easier to qualify for a business loan secured with collateral — an asset of equal or greater value than the loan amount — because secured loans are less risky for the lender. However, these types of loans are riskier for you because the lender can seize your asset if you can’t make your payments.
If you have a friend or family member with excellent credit, significant assets or both, you may be able to add them as a cosigner to your loan application. A cosigner in good standing can practically guarantee loan approval, but this option shouldn’t be taken lightly. If you default on the loan, your cosigner becomes responsible for repaying it, which is a tough position to put someone in.
Because you’re looking for a startup business loan without money, you’re already coming into the game at a weaker position. That’s why it’s important to carefully research multiple lenders’ requirements to determine where you might find the most success. For example, traditional banks and credit unions may require two years in business to qualify for a business loan, while some online lenders may accept businesses that are only six months old.
If you’re applying for a startup business loan with no money or revenue, you may not have much more to offer than your personal guarantee that the loan will be repaid. In business lending, a personal guarantee is a legally binding agreement that says you accept personal responsibility if your business can’t repay the loan. More specifically, if your business can’t pay, the lender can go after your personal assets, including cars, houses, bank accounts and other valuables.
There’s a lot to consider before you seek funding for your business when you don’t have any money.
Getting outside funding can make all the difference in growing your business. But it’s important to consider your situation before deciding if it makes sense.
There are plenty of good reasons why a business with no money might want to get a loan.
There are also times when getting a small business loan might not be the best idea.
If business funding through banks, credit unions and online lenders aren’t in the cards, consider these alternatives.
Getting a startup business loan with no money can be challenging, but several options might fit your business funding needs. Depending on your industry, business model or specific need, you might want to look into SBA microloans, invoice financing or factoring, merchant cash advances and business lines of credit or credit cards.
You could also consider alternative forms of business funding such as equity investors, crowdfunding or business grants. You can also explore some of the best business loans we’ve already done the research on.
In most cases, yes, you’ll need to provide a personal guarantee to secure a business loan, especially when you’re a newer business. A lender wants to ensure it gets repaid, and if your business isn’t profitable, it will turn to you.
A better credit score generally equals better rates and an easier time qualifying for a business loan. It will be even more difficult to qualify for a business loan with no money and bad credit. Some lenders offer business loans to borrowers with bad credit but expect to pay higher rates and have less favorable loan terms. You may also look into business loans that don’t require a credit check.
The main priority of all lenders is to get their money back — at a profit. Reliable cash flow is a good indicator that a business has the means to repay the loan.
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