Starting a company from the ground up can take time, especially if finance is needed. It is still possible to obtain a startup business loan with no money down. You can learn How to Get a Startup Business Loan with No Money by following this tutorial.
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Types of Startup Business Loan with No Money
- Microloans: The SBA, nonprofits, and specialty lenders typically provide small loans of less than $50,000.
- Equipment Financing: To spread the cost over a longer time, think about equipment financing as an alternative to purchasing the equipment all at once.
- Accounts Receivable Financing (factoring): You can obtain a loan based on your initial orders or customer contracts if your clients refuse to pay until you deliver their goods.
- Business Credit Cards: An excellent method of managing one’s temporary expenditures and potentially earning incentives that can be applied to other business requirements, like travel and lodging.
- SBA Loans: Though it does not engage in direct lending, the Small Business Administration guarantees bank loans, reducing the risk for lenders and increasing the likelihood that startups will be approved.
Alternative Funding Options for Pre-revenue Businesses
- Friends and family: Family wealth helped launch many of the world’s most well-known and successful businesses. Should you decide to take this route, be sure to treat it like a loan and form a formal business partnership.
- Crowdfunding: Crowdsourcing websites like Kickstarter and Indiegogo allow you to collect smaller contributions from a large number of donors. In general, crowdfunding serves as a pre-order for your product, which means you will be responsible for fulfilling the orders of early backers.
- Investment: When you raise money through investments, you are offering angel investors or venture capitalists ownership in your company in exchange for their startup money.
- Grants: Some businesses can receive government or local economic development grants from the start, though this is not common.
- Business Competitions: Taking part in business plan and startup pitch competitions can be a useful way to get started. Non-debt financing can be provided through prizes in these competitions. Look for opportunities that are specific to your area, industry, or minority group.
Pros
- Obtaining even a small amount of startup funding can help you launch, grow, and sustain your business.
- Unlike equity financing, startup loans let you maintain complete control and ownership of your company.
- Establishing business credit through loan repayment can make it easier for you to obtain more affordable business financing down the road.
5 ways to improve your chances of getting a business loan without revenue
- Be Transparent About Your Financials: Be truthful and open about your financial status at all times. Transparency is valued by lenders and fosters trust.
- Build and Improve Credit Score: Being creditworthy is crucial. If your credit score is low, consider raising it by paying bills on time, reducing debt, and avoiding new debt.
- Use a Personal Guarantee: If your company fails to repay the loan, you must give up your personal belongings. It’s a big risk, but sometimes it’s necessary. Consider consulting a lawyer or a financial advisor before making this decision.
- Gain Industry Experience: Business owners with expertise in their industry are preferred by lenders. If you don’t have any relevant industry experience, think about joining forces with someone who does or asking a mentor for advice.
- Build Strong Relationships with Lenders: Avoid approaching lenders unless you are in desperate need of money. Make connections before you need a loan. When you apply, you will already be a known entity.
Alternatives to getting a business loan with no money
- Equity financing: If you are unable to obtain a startup business loan without income, you should consider equity financing, which involves raising funds by selling shares or a portion of your business. With this type of financing, investors who purchase stock gain ownership of your company, but you are not obligated to repay the loan.
- Crowdfunding: You might want to consider crowdsourcing if your business is new. It’s an additional debt-free financing option that enables investors to join your venture. It could be a way to help you raise money for your business and spread the word about your products and services.
- Business grants: More established companies that don’t make any money might try to be eligible for grants for small businesses. Although funding is available, not every business will meet the eligibility requirements, and competition for this free money can be intense.
- Friends and family loans: One popular strategy for starting a business is to approach friends and family for business loans. However, it’s crucial to communicate your business plan, be open and honest about the risks, and put your agreements in writing with anyone investing in your startup to avoid misunderstandings.
Plan to Startup Business Loan with No Money
- Write a business plan: Any size business can benefit from having a business plan. It acts as a roadmap for starting and expanding your business and is often useful in convincing others to endorse your idea. It’s a document that will also change in tandem with your business. Some of the first sections you may want to include are the company description, business goals, descriptions of the products and services, market research, and sales plan. As your business grows, you can add more sections, like business financials and financial projects.
- Launch a scaled-down version of your business: If your full-time job is your only source of income and you don’t have any other sources, consider starting your business as a side gig. This may mean sticking to the evenings and weekends for your freelance work or utilizing small-scale production methods. You can convert your endeavor from a side project into an official business as soon as it starts to gain traction.
- Take advantage of free resources and services: Regardless of the stage of your business, there are free resources available. For example, even if you are not qualified for an SBA loan through the Small Business Administration, you can still obtain free training, mentoring, and other services from SBA resource partners, such as Women’s Business Centers, Veterans Business Outreach Centers, Small Business Development Centers, and SCORE business mentors.
- Take a second look at crowdfunding: Crowdfunding is an alternative form of funding, as we have previously discussed. Well-known websites like Kickstarter and Indiegogo might be a way for you as an unfunded business owner to raise capital. These websites can also be used to advertise your goods or services and grow the number of clients in your contact list.
Conclusion
How to Get a Startup Business Loan with No Money, If your full-time job is your sole source of income and you have no other options, consider starting your business as a side gig. This could mean limiting your freelance work to evenings and weekends or using small-scale production methods. As soon as your side project gains traction, you can turn it into a legitimate business.