How To Get A Business Loan With No Money

02/06/2023 08:52:24 +0000

Ideally, when that light bulb flashes above your head and you have the entrepreneurial idea of a lifetime, you'll have a tidy nest egg to gradually get your operation off the ground.

Once established, you can work on meeting eligibility requirements for a loan so you can take your business to the next level when you're good and ready.

But what if your business is ready for expansion while falling short of lenders' financial expectations?

Lenders typically want promising figures regarding revenue, business age, and credit scores, before even considering approving a loan, so if your numbers aren't looking so good, you'll find it tricky to secure the funding you need.

Don't give up hope just yet, though, as there are ways to get your hands on some funds to stimulate growth before your business reaches the profitability zone, and I'm going to be telling you all about them today!

Are Business Loans An Option If Your Business Isn't Profitable Yet?
Sadly, traditional business or SBA loans aren't really an option for you if your business revenue is more of a trickle than a stream, but there are other types of business-related loans that can get you into the green.
How To Secure Business Funding With No Money
Business Credit Cards

Business credit cards are a criminally underrated form of borrowing.

Although personal credit cards are often quite harmful tools, allowing people to get into more debt than they can afford to repay, business credit cards offer favorable interest rates and provide money immediately when you need it.

What's more, when used responsibly, they can boost your credit score so when you're finally ready to apply for a traditional business loan, you're more likely to get a lender to sign on the dotted line.

Getting one might still be a bit of a challenge, as issuers do take cash flow into account when approving applications, but they view a solid personal credit score as a far more reliable measure of your creditworthiness.

So, how solid are we talking here? Well, 690 is widely considered the baseline for successful applicants.

One of these handy cards will be particularly helpful if you're trying to get a startup into the profitability zone but, as yet, has generated very little revenue.

Equipment Financing

Equipment financing is a pretty clever loan format.

Essentially, the stuff you're going to buy with the agreed-upon sum will act as the collateral of the agreement, meaning you don't need stacked assets or an absolute deluge of a revenue stream to qualify.

That said, lenders of equipment loans will take your personal credit score, as well as your TiB (time in business) and how the equipment fits into your business strategy, into account when assessing your application.

The drawback here is that you can only use these loans for very specific, tangible assets, so if you're looking for money to funnel more generally into the many facets of your business, you won't get all the support you need from equipment financing.

Invoice Financing
Invoice financing is when you secure a loan based on your unpaid invoices.
In other words, you can access a certain amount of the money customers owe you for services before the customer actually pays you. When your client does settle up, you simply use the money to repay the lender.
While a lender of an invoice loan may take a quick peek at your business revenue, cash flow isn't their main concern.
As long as they can see you have the unpaid invoices to put down as collateral, they'll likely be willing to do business with you.
If you're trying to set up shop in a disadvantaged community, you may just qualify for a microloan.
As you can tell by the name, they're not the most substantial loans in the world (typically below $50,000), but they can be an incredibly helpful lifeline.
Mostly granted by nonprofit or mission-oriented lenders, the terms of microloans are very favorable, and as you're not expected to have the capital to get your business running, it won't be a huge factor in the approval process.
An airtight business plan, however, is absolutely essential, as lenders want to make sure their money has a beneficial impact on the community.
Is It A Good Idea To Source A Business Loan If You Have No Money?
Okay, so we've established that you can secure funding for your business without much (or any) money, but we've yet to ask whether you should take out a business loan with no money, so before we part ways, let's mull it over.
The quick answer is, no, not if you can help it.
If there's any way you can hold off until your personal and business accounts are looking a little healthier, you'll be better off in the long run, not to mention closer to a traditional business loan than ever.
However, if waiting simply isn't an option, there are a few scenarios in which taking a business loan when you have no money is a wise strategic move.
You've Got Money In The Pipeline
For contract-based work, you might be waiting for a frustratingly long time to receive payment for services rendered, and without this cash, you may not be able to start your next project.
If this knock-on delay is extensive, you'll likely start losing contracts to competitors, so it's essential that you find a way to streamline your workflow.
In this instance, it's perfectly reasonable to secure some invoice financing in order to fund future work.
You Have A Robust Financial Forecast

Unless you're lucky enough to have some very generous investors on your side, your startup probably isn't going to generate any significant revenue for some time.

But if your research and business plans show that your operation has some serious money-making potential in the future, it's worth trying to secure a loan so you can reach that profitable stage faster.

Finding a willing lender still might be quite challenging, but if you're passionate about your venture and the projections look promising, you're far more likely to find someone excited to do business with you.

Your Business Has Depleted Your Personal Accounts

As a small business owner, you're expected to use a lot of your personal money to nurture your venture and get it up off the ground, but if your personal and business finances have become mixed to the point that the latter has all but devoured the former, you need to take action.
The only solution here is finding a dedicated line of business credit, at least until your personal finances recover.

Are There Any Alternatives To Business Loans?

  • Zero-debt financing — Utilizing equity can help you source debtless loans, as can a more modern approach such as crowdfunding, the perfect tactic for pre-revenue startups.

  • Small business grants — These are fiercely competitive sources of funding, but that's to be expected when free money is at stake. Don't get your hopes up, but if you run an established business, you should absolutely apply.
  • Scrimping & saving — Do your best to cut out any non-essential aspects of running your business.
Final Thoughts
Trying to source funding for your business without much cash flow is something of a Catch-22, but there are ways out of this dead-end situation.
Assess the options discussed here today, and you'll find the most suitable path forward to the bright future of your business.
About the Host
Sophie Howard is the founder of Aspiring Entrepreneurs, a community designed to help people develop the skills and confidence to build a business and a life that serves them. Sophie began online in 2013 with an Amazon firm, which she sold for more than $1 million in 2015.

Sophie has lectured on stages all around the world, encouraging and teaching other ambitious entrepreneurs. She has established instructional programs educating thousands of students how to sell online, in addition to releasing over 1000 products.

Sophie has also written a book titled "Aspiring Entrepreneurs: A Guide to Finding Your Best Path to Financial Freedom."
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