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Published: Mar 27, 2024 12 min read

If you have a business dream but zero capital, don't fret. The financial world is teeming with opportunities, including the possibility of getting a startup business loan without any money on hand.

When starting a business, financing is often one of the initial challenges. Consider this an opportunity to hone your business vision and entrepreneurial skills.

During the process of pursuing a startup business loan, you’ll need to present a compelling story and a buttoned-up business plan to even get a hearing with a lender or investor. Read on to learn how business loans for startups work, whether you can get one without revenue and how to secure such a loan.

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How does a startup business loan work?

Just like planting a seed requires water and sunlight, nurturing a startup requires capital. Small business loans are specifically designed to provide this financial nutrient. They are loans offered by online lenders, traditional banks, investors and credit unions to aid entrepreneurs in launching their businesses.

The process usually involves borrowers presenting a detailed business plan, including financial projections, a loan application and potentially some collateral. The lender examines your plan, gauges the potential success of your venture and decides on the loan amount, interest rates and repayment terms. The specifics of this process can vary from lender to lender.

Once your loan has been approved and you've received the funds, the journey doesn't end there. Now comes the crucial phase of putting that capital to work effectively. Here are some things to consider:

  • Stick to the plan: Ensure that you adhere to your business plan as much as possible. Remember, your loan was approved based on this plan. Deviating significantly from it can not only lead to business instability but also make it challenging to meet your repayment obligations.
  • Manage cash flow: Be meticulous with your cash flow management. With a loan to repay, you'll need to have a firm grasp on your revenue and expenses so that your business can meet all its financial obligations.
  • Repayment strategy: Be disciplined about repayments. Defaulting on your loan can have severe consequences, including damage to your credit score, loss of collateral and potential bankruptcy.
  • Communicate with your lender: Keep open lines of communication with your lender. If you foresee any issues with repayment or if your business conditions change, it's always better to discuss this proactively.

Can you get startup business loans with no revenue?

Yes, it's entirely possible to secure a small business loan for a startup even with no current revenue or a poor credit score. Traditional financial metrics such as revenue and credit scores are crucial for lenders, but in the case of business financing, lenders understand that such indicators might not yet exist for startups. Lenders may consider any combination of the following factors when deciding whether to lend to your startup:

  • The business plan: A well-articulated business plan serves as the backbone of your application. It demonstrates to lenders your understanding of the market and your competition. It should also lay out your strategy for attracting customers and beating out the competition. A lender pays particular attention to your financial projections, which outline your expected revenues, costs and profits.
  • Strength of the idea: Some lenders base their decision on the potential of your business idea. If your idea is innovative and caters to an unmet need in the market, lenders might see a higher chance of success and hence, a higher likelihood of loan repayment.
  • Personal credit score: If your business has no revenue or credit history, lenders often look at the personal credit score of the business owner. A good personal credit score can increase your chances of loan approval, as it signifies to lenders your history of responsible credit behavior.
  • Collateral: Lenders may also consider any assets that you can offer as collateral. These could be personal or business assets that the lender can claim if the loan isn't repaid.
  • Personal guarantee: For startups with no revenue, lenders might ask for a personal guarantee. This means that if your business fails to repay the loan, you as the owner become personally liable.
  • Length of time in business: While startups by definition have a shorter history, the length of time you've been in operation can still play a role in the lender's decision-making process. If you've been in business for a few months, this could indicate to lenders that you have some level of business acumen and stability. Even if you haven't generated revenue yet, the fact that you're still operational can be a positive sign. However, each lender will have their own threshold for how long a business needs to have been in operation before they'll consider a loan.

If you already have a limited liability corporation (LLC) with some revenue to show, look into the best LLC business loans.

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How to get a startup business loan with no money

With the right approach and careful planning, you can successfully navigate this process. Follow these practical steps when you're ready to secure a startup business loan without any money:

1. Check the eligibility requirements of multiple business lenders

Every lender has unique requirements for a startup business loan. Some might require a minimum credit score, a guaranteed time in business or even specific financial statements. Review multiple lenders, from traditional banks to online lenders, and understand their specific terms before applying.

2. Decide which assets you may be able to offer the lender as collateral

If you're applying for a loan with no money and no revenue, lenders will likely require collateral. This could be anything from personal property to future business earnings. Knowing what assets you can offer as collateral will not only enhance your application's credibility but also expand your options when it comes to lenders.

3. Determine how much loan you can comfortably repay

Understanding your repayment capacity is vital. Consider your projected revenue, calculate your expenses and ascertain what size loan your business can handle. Remember, overextending yourself with a loan that's too large can lead to financial stress and jeopardize your startup's survival. You can always apply for an additional loan once you have some revenue to show lenders.

4. Carefully read over the loan terms and fine print

Take the time to pore over the fine print. Understand your interest rate, the repayment terms you must adhere to, and any penalties or fees attached to the loan. Some loans might come with variable interest rates that can significantly inflate your repayments over time. Others might have strict penalties for early repayments or late payments. Thoroughly understanding these terms can save you from costly surprises in the future.

5. Understand that you'll likely have to sign a personal guarantee

In many cases, lenders require a personal guarantee when granting loans to startups. This means if your business defaults on the loan, you, as the business owner, become personally liable for repaying the debt. Before signing such a guarantee, consider the implications this could have on your personal finances and assets. While it's an excellent way to get approval for your loan, it also increases your personal risk.

6. Weigh the benefits and risks of applying for a startup business loan

While a loan can give your startup the financial jumpstart it needs, it's not without risks. You've got to balance the potential growth of your business and what it will mean to you financially against the obligation of loan repayments and the risk of default. Consider how the loan will impact your business's cash flow and whether you can meet the repayment schedule even in less-than-ideal financial circumstances.

7. Have a detailed business plan ready

As a business owner, knowing how to write a business plan is an important skill. A robust, well-researched business plan can significantly improve your chances of approval. It should highlight the business's potential profitability, target market, competition and a realistic projection of revenues and expenses. Financial projections, in particular, can demonstrate to lenders that you've thought through how you'll use the loan and how you'll generate enough revenue to repay it.

Alternative business funding options for startups with no current revenue

If traditional loans seem unattainable or unsuitable, other funding options might better fit your startup. Business credit cards, for instance, can provide short-term financing. Investors, whether they're angel investors or venture capitalists, may be willing to finance your business in exchange for equity.

One popular new financing option for small businesses is through microloans. These loans can yield new businesses anywhere from a few hundred dollars to $1 million. They're typically offered by nonprofits, but government agencies have also started offering them. The Small Business Administration, for example, now offers microloans of up to $50,000 for supplies and equipment financing.

However, be aware that microloan lenders will still need to thoroughly analyze your business plan and creditworthiness before disbursing funds.

Crowdfunding and peer-to-peer lending platforms like Kickstarter are also popular resources for entrepreneurs. These platforms allow a large number of people to contribute small amounts towards your funding goal, often in exchange for product discounts or early access.

If you're lucky enough to have family or friends with piles of cash sitting around, you might consider pitching your idea to them. Many businesses get their start through investors that have a personal relationship with the entrepreneur. Keep in mind what kind of terms you could offer and whether or not you're willing to put your personal reputation and relationship on the line if your endeavor doesn't work out the way you hope it will.

Lastly, personal loans can be used to fund a business, though this typically comes with higher interest rates and requires a strong personal credit score.

To summarize, be sure to weigh all your options, and consider the risks and benefits of each funding option, before making a decision.

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How to get a startup business loan with no money FAQ

What do I need for a startup business loan?

Requirements for a startup business loan vary depending on the lender. However, a comprehensive business plan, complete with financial projections, is typically a must. Lenders may also look at your personal credit score, any assets you can offer as collateral and financial statements, among other requirements. If your business has no revenue, you may also need to sign a personal guarantee.

How much can I get for a startup business loan?

The loan amount you can secure for a startup largely depends on the lender, your business plan and the collateral you can offer. However, traditional loans can range from a few thousand to over a million dollars. Venture capitalists may commit to higher funding than traditional banks. Online lenders might offer smaller loan amounts, but they usually have more lenient requirements and quicker application processes.

Which banks offer startup business loans?

Several traditional banks offer startup business loans, although their requirements might be more stringent than alternative lenders.

Banks such as Wells Fargo, Bank of America and Chase are known for their small business loan offerings. The U.S. Small Business Administration has several grant and loan programs for new businesses. Microloan lenders like Kiva and Accion also provide loan solutions that could work for small businesses without any revenue.

Online lenders like Funding Circle, Fundbox and OnDeck offer loans to small businesses, though many will require some revenue.

Additionally, some smaller, local banks and credit unions might have more flexible offerings tailored to local businesses.

How hard is it to get a small business loan for a startup?

Securing a small business loan for a startup can be challenging, especially if you have no money, no revenue or bad credit. Many lenders often want to see annual revenue of $50,000-$100,000 from a company that has been in business for at least 1-2 years. However, a solid business plan, a clear repayment strategy and a willingness to offer a personal guarantee or collateral can significantly increase your chances of approval.

Summary of Money's how to get a startup business loan with no money

Knowing how to get a small business loan for a startup with no money may be one of your first, great entrepreneurial lessons. Getting a loan for startup money is, in fact, possible. But, you'll have to produce a well-researched business plan to get any consideration from lenders. It’s likely you’ll also have to personally guarantee the amount you borrow for your business or offer collateral. You should carefully review applications to decide if the terms are acceptable. And, if you find that your loan offers fall short of how much money you were hoping to get, consider combining alternative funding sources to bolster your coffers.

With a sound strategy, clear understanding of the lending landscape and a solid business idea, you can turn the odds in your favor. It's all about the right approach, research and perseverance.

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