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 some borrowers get loans that wouldn’t normally qualify. But you’ll need a solid plan for repaying any business funding you get.
Here’s a look at how to start a business with no money.
Key takeaways
- Lenders usually set minimum time in business, credit score and revenue requirements
- You may need a specialized lender or type of loan to qualify
- Future revenue or assets can help you secure a loan
- Assess your business budget to help you manage repayments
How to get a small business loan with no money or revenue
To get a small business loan without money or revenue, you’ll need to pay attention to the assets you do have and your business’s other qualifications.
Here are some tips to help you find where and how to qualify for a loan:
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 | $100,000 to $250,000, but as low as $36,000 | $100,000 to $250,000 |
Lenders that accept low or no revenue
Nearly all lenders require a down payment or minimum amount of revenue. But a few will work with businesses with little-to-no money. Try out these lenders:
| Lender | Minimum required revenue | Types of loan |
|---|---|---|
| Fundible | $100,000 |
|
| Kiva | No requirement | |
| Paypal | $15,000 to $33,300, depending on loan |
|
Pay attention to cash flow and assets
While most lenders need you to show a current flow of revenue or capital to get a loan, some loans look more closely at your accounts receivable or other assets.
Accounts receivable financing lets you use unpaid invoices or future sales to get funding. It lets you use this revenue to repay the financing company.
Meanwhile, secured business loans may help you get a loan with no down payment because they’re guaranteed by business assets. Lenders may be more willing to take on 100% financing because they can use the collateral to repay the loan if you fail to make payments.
See below for more details on specific business loans.
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 these 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 35 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.
8 financing options when your business has no money
There are several business loan options that require little revenue or capital:
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 or community-based lenders or as specialized programs for underserved businesses. 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 $100,000 with APRs of 5.99 percent to 17.99 percent.
- Kiva: This peer-to-peer lending platform lets you get loans up to $15,000 and doesn’t charge interest.
- Huntington National Bank: Its Lift Local Business Loan helps minority business owners get up to $150,000 in funding.
Business grants
A business grant is an ideal option if you have no money because grant organizations essentially award free money to the business of their choice. But be ready to compete for the grant.
You apply alongside other businesses that meet the grant’s qualifications. You may also need to provide a detailed business plan or even show up for business presentations or competitions. Any documents you send in should show how your business stands out and that you have a well-thought-out plan for growth.
Bankrate insight
For more information on business grants check out any of the following guides:
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 exception is a secured credit card which requires you to deposit money as collateral, such as $1,000. If you don’t have the best credit but don’t want a secured card, you can find unsecured options like the Spark 1% Classic that cater to fair credit borrowers.
You can use a business credit card for short-term expenses, and you won’t have to pay off your credit card right away. When the bill becomes due, you can pay it in full or make the minimum payment.
If you pay in full, you won’t be charged credit card interest on any of those purchases. You’ll also get extra time to pay the bill without incurring interest. Credit card issuers are required to send you a bill at least 21 days before its due date. This grace period is like getting a short-term loan without paying interest.
Equipment loans
An equipment loan is a type of term business loan that’s secured by the commercial equipment you’re buying. Because it’s secured, it’s easier to qualify for than other business loans. Lenders may lower requirements, such as requiring one year in business and an annual revenue of $100,000. It’s also possible to get 100 percent financing, so you don’t have to put a down payment on the loan.
Invoice financing
Invoice financing is a type of accounts receivable financing using your unpaid invoices to get approved. In order for your business to qualify, financing companies evaluate your clients’ payment histories and invoices. The company then advances 80 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. 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
Also a type of accounts receivable financing, a merchant cash advance helps you get funding based on past credit and debit card sales to get approved. You won’t need any money upfront. But for most MCAs, you’ll have an aggressive daily or weekly repayment schedule.
Payments are either a percentage of your sales or a fixed payment. Percentage-based MCAs may not have a set repayment term, meaning you can pay for the loan as quickly or as slowly as your sales allow.
Venture capital
Venture capital is a startup financing option offered either by venture capital firms or individual investors. Venture capitalists provide funding, usually in exchange for a high equity stake in the business.
You’ll be expected to have a strategy for high growth in place to satisfy the investors. But you also get mentoring and business resources to fuel your growth, giving you an edge over small businesses trying to make it on their own.
Crowdfunding
If you need a little capital to kickstart your business or expand, you could go the crowdfunding route. Crowdfunding raises money for your business from anyone willing to invest in it, including family, friends or investors.
You can use crowdfunding platforms like Kickstarter or Kiva to find interested parties. You usually reward your small business investors with perks like your product, swag or equity, depending on the level of investment.
When to get a business loan with no money
The main consideration for getting a business loan with no money is that you should be able to manage repaying the loan. Ultimately, the choice comes down to whether you qualify and how confident you are that you can make payments.
Though there’s a risk to getting a loan without having a steady flow of revenue, here are scenarios when it might make sense to get a business loan:
- Signed contracts with clients for future work
- Outstanding invoices for work already done
- A track record of revenue growth
- A startup business model with high growth potential based on market research
Bottom line
You may need to get creative with the types of funding at your disposal, but it’s possible to get business financing without much money or revenue. Consider whether you can secure work contracts ahead of time or pay back a loan or investors from future sales to open up possibilities.
Yet the more time you have in business and revenue you can build up, the more business loan options will be available to you and the less risk you’ll assume in repaying the loan.
Frequently asked questions
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Because the SBA doesn’t require down payments for some loans under $25,000, it’s possible to get an SBA loan without a down payment. But finding a lender that doesn’t require a down payment is rare. The down payment required varies from lender to lender, often starting at 10 percent. You might have the highest chance if you work with a community-based SBA lender, which aims to serve underserved communities.
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The minimum credit score required for a small business loan varies from lender to lender. Traditional banks and credit unions generally like to see a personal FICO score of 670 or higher. Online lenders often take FICO scores around 600, some going as low as 500.
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You can get a startup business loan by understanding each lender’s requirements and the types of loans you might qualify for. Ultimately, lenders want to see strong cash flow, which may take a few months to build up. Bare minimum lending criteria is usually about six months in business and $100,000 in revenue.
