How to Get a Business Loan With No Money

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As the saying goes: you need money to make money. If you’re looking for a business loan but don’t have extra cash to put down, your options are limited – but not zero. While most lenders require money or an equity injection for loan approval, you can still get the funding you need without revenue or a down payment. Here are your options. 

Business loans for startups with no money

From business loans and credit cards to grants and venture capital, here’s a rundown of your best 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 such as community development financial institutions or specialized programs for underserved businesses. These loans typically have low eligibility requirements and may not require a minimum credit score or annual revenue. 

They may, however, be only offered to business owners in economic opportunity areas or underserved communities, or come with additional requirements for mentoring or education. 

Microloans are best if:

• You need low funding amounts.
• You qualify for funding at a CDFI.
• You how a low or no revenue stream. 

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.

Lines of credit are best if:

• You have flexible spending needs
• You’re okay with lower funding amounts
• You have a good credit score

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 card, though you may need to pay an annual card fee. 

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.

A business credit card works best if:

• You have lower funding needs
• You want to build credit
• You’re able to pay off the balance each month to avoid interest

Equipment loans

An equipment loan is a term loan that’s secured by the commercial equipment you’re buying with the loan funds. Equipment loans can cover vehicles, office furniture, manufacturing equipment and more – so long as they’re real assets that can be sold to cover the loan if you default. 

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.

Equipment loans work best if:

• You have equipment to secure the loan with
• You have lower revenue

SBA CAPlines

SBA CAPLines are lines of credit guaranteed by the federal government, making them cheaper than conventional lines of credit. Interest rates are capped at the prime rate plus 3 or 8 percent, depending on the size of the CAPLine, and you can borrow up to $5 million. While there’s no down payment required, you may have to put collateral down for loans over $50,000. The SBA also charges a fee between 2 and 3.75 percent of the loan, depending on the size. 

While SBA loans are more affordable than other loan types, they have more restrictive requirements around business types, ownership and other criteria. Approval time is also notoriously slow, and may take up to 90 days. 

SAP CAPlines work best if:

• You can meet SBA requirements
• You’re not in a hurry for funding
• You need flexible funding amounts

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.

Invoice financing works best if:

• Your business works primarily with invoices
• You need funding quickly
• You’re able to manage the additional fees
• Your customers pay on time

Merchant cash advances

A merchant cash advance (MCA) 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.

Merchant cash advances work best if:

• Your business works primarily with card trasnactions
• You need funding quickly
• You have bad or no credit history
• You’re able to manage the high fees

Grants

Business grants are money given to businesses as a gift, with the purpose of help small businesses get off the ground and grow. Unlike loans, grants don’t have to be paid back. However, grants do tend to be competitive, and require that you apply for them, which can take time. They also may come with narrow criteria, such as reqiruing your business work in a particular area or industry.

Grants are offered by local, state and the federal government, as well as numerous non-profit and business organizations.

Grants work best if:

• You’re not in a rush for funding
• You don’t want to go into debt
• You can qualify for a particular grant type

Crowdfunding

Crowdfunding involves soliciting donations from the public to help fund your business, often through a platform like Kickstarter or Kiva. Some crowdfunding platforms work as an investment platform, with the funders owning a portion of the business or expecting to get paid back. Others will grant the funded money in exchange for backer prizes such as products or stretch goals if you reach certain funding amounts. This isn’t always the fastest funding method, as it may take a month or longer for a campaign to get funded. 

Crowdfunding can work if:

• Your business has sizable following or is able to drum up publicity
• You’re able to fulfill ay promises you made during the campaign
• You’re not in a rush for funding

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:

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.

Ways to improve your chances of loan approval

While it’s ultimately up to the lender as to whether your application will be approved, there are a few ways to improve your chances of approval. 

• Offer up business collateral. Business equipment loans are secured with the equipment you purchase, making them more accessible.
• Have a high credit score. A high personal credit score can demonstrate to lenders that you’re reliable enough to pay back the loan, even if you don’t have much to put down.
• Sign a personal guaruntee. This allows the lender to seize your personal assets if default on the loan.
• Have a detailed business loan proposal. Writing out a thorough business plan can demonstrate you know how to use the loan money and how you’ll pay it back. 

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

• Why is cash flow important to business lenders?
  

  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.

• Can you get an SBA loan with no money down?
  

  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.

• Can you get a no credit check business loan with no revenue?
  

  While most lenders require a credit check to determine your eligibility, some may overlook this requirement or do a soft credit check. If you wish to avoid a credit check altogether, alternative business financing options, such as crowdfunding platforms like Kiva, may be an option.

• How do I get a startup business loan with no money?
  

  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.

Methodology

• Cost
  

  Loan costs can be roughly calculated by the APR, which encompasses both the interest rate and fees involved with the loan. We’ve based our cost calculations on the current average APR for various loan products in the industry, as well as the Federal Reserve rate, which sets the standard for most loan costs.

  Rating	Criteria
  ★★★★★	APR of 0 to 4% above Fed rate
  ★★★★☆	APR of 4 to 8% above Fed rate Factor rate of
  ★★★☆☆	APR of 8 to 12% above Fed rate
  ★★☆☆☆	APR of 12 to 20% above Fed rate
  ★☆☆☆☆	APR of 20% or more above Fed rate

• Money down requirements
  

  Many lenders require money down or an equity injection when taking out a loan, which can limit funding for businesses without cash to spare. These ratings are based on the down payment minimums for a range of loan products available in the business loan market, as well as the average down payment for business loans.  The ratings are based on what the lender explicitly requires; for example, $10K down only counts if the lender requires $10K regardless of loan size.

  Rating	Criteria
  ★★★★★	No money down required
  ★★★★☆	10% of loan required $10K to $50K down
  ★★★☆☆	20% of loan required $50K to $100K down
  ★★☆☆☆	30% of loan required $100K to $200K
  ★☆☆☆☆	40% or more of loan required $200K or more

• Credit requirements
  

  Many lenders will look at a borrower’s personal credit score when qualifying them for a loan, limiting borrowers with no or bad credit history from obtaining funding. We based our ratings on the credit score requirements for a range of lending products, including bad credit loans, SBA loans and traditional bank loans.

  Rating	Criteria
  ★★★★★	No credit score minimum
  ★★★★☆	Credit score minimum below 600
  ★★★☆☆	Credit score minimum of 600+
  ★★☆☆☆	Credit score minimum of 700+
  ★☆☆☆☆	Credit score minimum of 800+

• Revenue requirements
  

  Many lenders will have a revenue minimum in order to qualify for a loan, which helps demonstrate that the borrower can repay the loan. This can sometimes exclude smaller or newer businesses with lower cashflows from qualifying for lending products. We’ve based our ratings on a range of revenue requirements for a variety of loan products, with the caveat that some products with no minimum revenue may require verification of separate income from the owner.

  Rating	Criteria
  ★★★★★	Revenue minimum under $50K/No revenue minimum
  ★★★★☆	Revenue minimum of $50K to $100K
  ★★★☆☆	Revenue minimum of $100K to $500K
  ★★☆☆☆	Revenue minimum of $500K to $1M
  ★☆☆☆☆	Revenue minimum of $1M+