How To Get a Startup Business Loan With No Money or Revenue
by Fundid on Oct 16, 2023 8:00:00 AM
Are you a small business owner who has always dreamed of launching their own startup but lack the necessary funds? You may be feeling discouraged, especially given the current financial climate. But don’t give up on your dreams just yet! Believe it or not, you can get a startup business loan with no money; all it requires is research and careful planning into available options.
With this guide, we aim to take out the guesswork involved in finding and applying for loans when you don't have anything to put down as collateral. Read on for tips and advice from our experts about how to get a successful start-up loan without any money upfront.
Related Reading: The Complete Guide to Small Business Loans
Loan Options for Businesses Without Money or Revenue
Equipment loans are a great option for businesses that need to purchase equipment but don't have the cash or revenue to do so. With this type of loan, businesses can borrow money to purchase the necessary equipment and then pay it back over time with interest. This type of loan is typically secured by the equipment itself, meaning that if the business defaults on the loan, the lender has the right to seize the equipment as collateral.
However, some lenders will still require a revenue requirement, so you may need to prove that your business has some form of revenue before they consider giving you a loan for the equipment.
Types of Equipment You Can Finance
- Commercial Vehicles: These include trucks, vans, and cars used for business purposes.
- Construction Equipment: Items like excavators, bulldozers, cranes, and loaders can all be financed.
- Office Equipment: Computers, printers, projectors, phones, and other office essentials can be financed.
- Restaurant Equipment: Industrial ovens, refrigeration units, deep fryers, and other kitchen equipment fall into this category.
- Manufacturing Equipment: This can range from heavy machinery to smaller tools used in production processes.
- Agricultural Equipment: Tractors, combines, irrigation systems, and other farming machinery can be financed.
- IT Equipment: Servers, data storage devices, networking hardware, and other IT-related equipment.
- Gym & Fitness Equipment: Treadmills, weight machines, exercise bikes, and other fitness equipment.
- Retail Equipment: Point of sale systems, display racks, security systems, and other retail-specific equipment.
- Audio/Visual Equipment: Items like professional cameras, sound systems, lighting equipment, and more for media production.
Invoice financing is another option for businesses without money or revenue. With this type of loan, businesses can use their unpaid invoices as collateral in order to secure a loan from a lender. The lender will then advance funds based on the value of the invoices, and once they are paid, the funds will be repaid along with interest. This type of loan is ideal for businesses with steady cash flow but limited capital.
Convert Your Receivables Into Cash with Now Account
Now Account is a financial tool that allows businesses to convert their receivables into cash quickly. It's not factoring, and it's not a loan. Instead, it provides a simple way for businesses to increase their working capital and manage their B2B cash flow effectively.
The process of using Now Account is straightforward:
- Customer Approval: Add your customer and have them approved.
- Upload Invoice: As soon as you receive an invoice, upload it into the Now Account system.
- Receive Your Funds: Your ACH payment will be received upon approval.
The Paintbrush Loan
The Paintbrush Loan provides the funds you need to get your business off the ground from day one. Through $50,000 loans, they solve the 'chicken-and-egg' problem many new businesses face; you need traction to secure funding, but you also need funding to prove your business model.
Here’s the simplified summary of the Paintbrush Loan:
- $50,000: Your loan amount
- $1,178-$1,195: Your monthly commercial loan payment for the next 5 years (exact amount to be finalized when you complete your loan agreement)
- Monthly: How frequently your payments are due, starting immediately
- 1st: Date your loan payments are due each month, starting immediately
- 5 years: The life of the loan (60 months)
- 15% APR: What the interest rate rounds out to if you pay the loan back over the 5-year period according to the set schedule
- $20,790-$21,652: Total amount of interest you'll pay over the life of the loan (exact amount depends on the date you complete your loan agreement)
- $0: Origination fees, subscription fees, or any other hidden fees.
Why Do Lenders Typically Have Revenue Requirements for Businesses?
While we know it takes money to make money, lenders understand that businesses without money or revenue still need capital to get their operations going.
However, lenders want reassurance that the business will be able to pay back the loan and interest over time. This is where a revenue requirement comes in: lenders want to make sure that the business can generate enough income to cover its costs and debt payments.
For instance, if a lender has a revenue requirement of $10,000 per month for a loan application, they are looking to see evidence that the business is generating at least this amount in order to approve the loan and ensure it will be repaid.
Are There Any Drawbacks to Getting a Business Loan Without Revenue?
Yes, loans without revenue often have higher interest rates due to the perceived risk. Also, you may need to offer personal assets as collateral, which could be at risk if your business doesn't succeed. Also, if you default on the loan, it will be reported to credit bureaus and potentially damage your credit score. This could make it more difficult to receive financing for future businesses.
Overall, you should approach no-money startup loans cautiously and fully understand the risks before signing a loan agreement. Do your research and compare different types of loans to find one that works best for your business. With the right loan and a bit of hard work, you can make your startup dream a reality!
How can a Business Owner Improve Their Chances of Getting a Loan Without Having Revenue?
First, focus on improving your personal credit score. This can be done by paying off debt, making timely payments, and monitoring your credit report.
Second, create a strong business plan that highlights your vision and strategy for growth. Third, gain as much industry experience as possible. This can demonstrate your expertise and commitment to the success of your business.
Finally, offering collateral, such as property or equipment, can provide security for the lender and increase your chances of getting approved. Remember, with hard work and dedication, you can overcome this obstacle and successfully secure the loan you need to take your business to the next level.
Explore Your Funding Options Today!
Starting a business without money or revenue is possible if you find the right loan. There are many different options available, from invoice financing to startup loans. Before committing to anything, make sure that you researched the lender, understand the terms of the loan, and are comfortable with the repayment schedule. Explore the Fundid Capital Marketplace to find your next lending partner!