By Soumava Goswami
As a startup owner, you might find it difficult to secure loans. This holds even for businesses that have been operating for a couple of years. However, it is possible to secure a loan. You only need to learn how to get a startup business loan with no money.
In this article, you will learn ways to secure a loan if you are a startup with no money. This article will also guide you on how to make your finances stronger. Moreover, you will also learn how to apply for various eligible loan options. Hence, to learn more, read on to the end of the article.
Startup Business Loans With No Money
Whether you are an agency business or not, you might need cash on hand, to be able to get a business loan. Basically, lenders prefer those borrowers who have a steady flow of revenue and earn profits. However, if you do not qualify for such loans, you can always choose alternative financing options to secure funds.
Do you want to know how to get a startup business loan with no money? Here are some alternative financing options you need to check out:
1. Microloans
Generally, you can secure a microloan of up to $50K or less. Generally, lenders from non-profit organizations and community development financial institutions (CDFIs) offer microloans.
In fact, microloans are available at low cost. Moreover, businesses that come from minority communities get the most benefit from these loans.
Basically, microloans are different from traditional loans. This is because they have flexible qualification requirements. Hence, lenders that offer microloans can prefer working with startups with no revenue.
2. Business Lines Of Credit
This is a type of revolving credit. That is, it allows you to use your funds constantly. Initially, while offering you a loan, the lender will give you a credit limit. It is the maximum amount of money that you can borrow. Here, the minimum revenue requirement is $100,000.
Moreover, the lender also allows you to draw money at any time during the draw period. Furthermore, as you make repayments, your credit limit replenishes. Furthermore, the system also allows you to make weekly or monthly payments along with interest.
However, it depends on the lender whether you need upfront money or not. For example, some lenders will charge you an origination fee and a draw fee once you withdraw funds.
3. Business Credit Cards
As a startup owner, you must have business credit cards with you if you need fast cash. Moreover, with most cards, you will also not need to have upfront money to avail yourself of credit.
However, you need to have an excellent credit score in most cases. Furthermore, some cards offer additional benefits like discounts, employee cards, and cash back or travel rewards.
Basically, if you must fulfill short-term expenses, you do not need to pay off your credit immediately. Despite that, you can pay your bills in full or make a minimum payment if your bills are due.
Apart from that, you can avoid interest charges if you repay your loans in full each month. Hence, you can see that a business credit card is an inexpensive way to build business credit. Also, you can manage your business finances better.
4. Equipment Loans
If you want to raise funds for your business to buy commercial equipment, then an equipment loan can help you. Generally, these are secure loans and are easier to qualify for than other business loans.
Moreover, lenders have low requirements (for example, annual revenue of up to $100K). Apart from that, you will also get 100% financing in some cases. Therefore, you do not need to make a down payment for equipment financing.
5. Invoice Financing
It is a type of accounts receivable financial that uses your unpaid invoices. Hence, to qualify your business, you must give data on your clients’ payment histories and invoices. Then, the company advances you up to 90% of the invoice amount. The best part is that you can use it any way you choose.
Moreover, the structure of payment differs from company to company. However, most of these financial companies will ask for repayments after you get client payments. In addition to that, the fees can be high.
Apart from that, financing companies will often charge a one-time fee. This fee is a percentage of your total invoices. However, if an invoice stays outstanding, you can add an additional percentage for each week.
6. Merchant Cash Advances
With the help of a merchant cash advance, you can avail of funding after your debit or credit card sales. Here, you do not need to show any earnings upfront.
Basically, you will be making payments from a percentage of your sales. In some cases, you need to make a fixed payment. However, on the negative side, the repayment schedule is strict (daily/weekly).
How To Get A Startup Business Loan With No Money?
The following are the major factors you need to consider if you want to get a startup business loan with no money:
1. Research The Requirements Of Lenders
Every lender you find will have a different lending requirement for business loan approval. Hence, whether you are a new startup or a business with no available capital, you need to ensure your business meets the minimum criteria for loans.
2. Find Lenders Who Accept Low Revenue
Initially, you must research the requirements and experience of the lender you are applying to. Basically, most lenders you find will want you to have a consistent revenue deposit.
On the other hand, banks and credit accounts require you to have a high amount of revenue. Only a few alternative and online lenders will offer you a loan with little to no money.
3. Consider Your Assets And Cash Flow
In general, most lenders will want you to have a current flow of revenue or capital. However, some loans go beyond cash flow. Hence, with the help of accounts receivable financing, you can use unpaid invoices to get funding for your business.
On the other hand, with the help of secured business loans, you can avail yourself of a loan even with bad credit. Also, you do not need to make any down payment in this case. This is because you provide a guarantee with your business assets.
Here, lenders generally try to provide 100% financing to startup owners. This is because they can seize the collateral or assets if you become a defaulter on the loan.
4. Decide On A Loan Amount That You Can Afford
A high loan amount always looks attractive, and even some lenders will approve for you to borrow. However, you need to ensure that you can repay the loan. That is, the loan repayment amounts must fit into your monthly budget.
Hence, you must ensure that you calculate monthly payments and total interest. This will give you a better idea of when and how to get a startup business loan with no money.
Moreover, you must also find out whether you can manage loan payments and the total interest of the loan. Also, check the estimate of your debt payments regarding your business revenue. The two tools that you can calculate are the Debt-to-income ratio (DTI) and the Debt service coverage ratio (DSCR).
Pros And Cons Of Business Loans With No Money
The following are the major pros and cons of startup business loans with no money:
Pros
Here are the major pros of startup business loans with no money that will benefit you:
- Even if you get a small amount of what you apply for, it will help you to grow and sustain your business.
- You can keep full ownership of your business and control it fully. This is quite different from equity financing, which takes a part of ownership of your business.
- You can establish your business credit if you repay your business loan on time. As a result, you have a better chance of getting business financing in the future.
Cons
Here are a few cons of startup business loans with no money that you need to be aware of:
- Generally, startup business loans with no money are risky. Also, it gets riskier if you do not have revenue, as you must pay higher fees and interest rates. Hence, this type of financing is quite expensive for a startup.
- Since there is always a risk of losing payment, lenders will require you to offer a personal guarantee or collateral.
Getting Your Business Loan
Before you decide how to get a startup business loan with no money, you must determine how to use the funds for your business.
Also, it would help if you evaluated whether you could wait for a longer time or not. This is because if you develop a steady revenue stream, you can get a more favorable loan offer, which will be easier to repay.
Do you have more suggestions on how to get a startup business loan with no money? Please share your ideas and opinions in the comments below.
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