It can take time for early-stage businesses, even those operating for a few years, to generate revenue. While it’s possible to get a startup loan with no money or revenue, you’ll typically qualify for better rates and terms once your finances improve. If you can’t wait for a small-business loan, there are funding options available even without revenue.
Understanding these options thoroughly is crucial — just like knowing the answer to What does DOLE stand for, which refers to the Department of Labor and Employment.
Business loans for startups with no revenue
If your business is under two years old and has limited funds, securing a traditional term loan may be difficult. However, these alternative financing solutions can help.
Microloans
Microloans are smaller loans (usually $50,000 or less), typically issued by nonprofits and mission-based groups like CDFIs. These loans are low-cost, often designed for underserved communities, and have flexible qualification requirements, making them a good option for startups without revenue.
Equipment financing
With equipment loans, the lender funds up to 100% of the equipment purchase, using the equipment as collateral. Lenders focus on the equipment’s value and your business plan, so revenue may not be as important. Qualification depends on credit, time in business, and how the equipment fits your operations.
Invoice financing
Invoice financing, or invoice discounting, uses unpaid invoices as collateral. Lenders advance a percentage of your invoices’ value. They primarily assess the value of your invoices, making this a good option for startups with limited cash flow.
Invoice factoring
Similar to invoice financing, factoring involves selling unpaid invoices to a factoring company. The company collects payments from your customers. Factoring companies focus on your customers’ credit and the age of your receivables, making it a viable choice for startups with little revenue or poor credit.
Business credit cards
A business credit card can improve your credit and help you qualify for future loans if used responsibly (by paying bills in full and on time). Personal credit often matters more to issuers than cash flow, and you’ll likely need a credit score of 690 or higher to qualify for most cards.
How to get a startup business loan with no money
Lenders determine how risky a particular borrower is in part by the amount of revenue they are generating. It’s important to understand what a lender is looking for, and what other positive attributes you can offer.
Offer collateral
Collateral is any valuable asset that a lender can use to recover its losses in the event that you are unable to repay your loan. Offering collateral like large equipment, real estate or cash, can improve your chances of getting approved for a startup loan, even without revenue. Securing your loan can also help you get better rates and terms.
Consider adding a cosigner
Adding another guarantor to take over loan payments in the event of a default, also known as a cosigner, is another way to mitigate a lender’s risk. Typically, you’ll benefit from a cosigner with excellent credit, large assets or both.
Because cosigners are often trusted family members or friends who believe in your business, you’ll want to consider this option carefully and your ability to repay the financing because defaulting on the loan will affect your cosigner’s finances as well as your own.
Know a lender’s requirements
Some lenders require borrowers to have a certain amount of money in their business bank accounts before they’ll even consider extending a loan. But other lenders are a little more forgiving of cash flow if borrowers have a strong personal credit history or meet other business loan requirements. Make sure you know what a lender is looking for before you apply.
Determine whether you’ll be able to repay
If you’re not confident you’ll be able to repay a loan without money in the bank, you may end up having to borrow more to pay off your existing debt, which can trap you in a difficult debt cycle. In addition to covering your loan payments, you’ll also need to be able to cover your day-to-day expenses.
Loan payments vary based on your funding amount, interest rate and repayment term. Though you won’t know your exact numbers until your loan is approved, you can estimate your payments with our business loan calculator.
Some lenders may offer monthly payments, but startup business loans are more likely to require weekly or daily payments. If you can’t afford your potential loan payments, you might try searching for a more competitive option — or look for an alternative way to fund your business.
