Startup Business Loans with No Revenue

TABLE OF CONTENTS
Building a successful startup comes with its fair share of challenges, chief amongst them being the search for loans and funding.
While chasing that dream investment, startups often face a tough time trying to secure loans, primarily due to minimal or no revenue. Understandably, many lenders find this absence of steady revenues a red flag, sometimes closing doors to potential investment opportunities. However, we’re here to tell you that lack of revenue should not necessarily be a dealbreaker for eligible startup loan candidates.
Having no revenue at the start of your entrepreneurial journey is not an insurmountable disadvantage. In fact, many successful businesses today started from the same position. In this article, we’ll look at the different funding avenues open to you for kickstarting a business with no revenue.
Can You Get a Startup Business Loan with No Revenue?
The short answer is yes, you can. There are several opportunities for you, as a business with no revenue yet, can receive funding for further development of your company. However, you should be aware that depending on the type of loan you are trying to get approved for, it might be more difficult to get a positive response – but it’s not impossible.
Types of Startup Business Loans with No Revenue
Traditional banks might not be the most accommodating option when it comes to financing a startup with no revenue. The reason is simple: banks often perceive startups, especially those without a steady revenue stream, as high-risk investments. They prefer to lend to established businesses with a proven track record of profitability and reliable cash flow.
However, by no means does this imply that startups with no revenue are left without options. There are several types of startup business loans suitable for those just starting out who have yet to establish a steady revenue stream.
Let’s discuss some alternative financing options to help your startup overcome its initial financial hurdles and set the foundation for its future growth. We will also answer the question of how to get a startup business loan with no money by providing you with application instructions.
Here are (mostly) easy approval startup business loans with no revenue.
Personal Loans
Personal loans are based on the borrower’s personal credit history rather than the financial health of their business, allowing them to access funding even if they still need to establish a steady revenue stream.
How to Apply
Generally, applying for a personal loan requires you to submit an online application, along with documents such as a copy of a state-issued ID, proof of residence, documents proving income such as bank statements or pay stubs, and a tax return. The decision might take a few days and after you’ve been approved, you need to sign the documents.
Business Credit Cards
For startups, business credit cards can be a practical tool for managing cash flow and tracking expenses. They offer the flexibility to cover costs when cash is tight and pay back when revenue comes in. Plus, the rewards and perks can help offset business expenses.
How to Apply
After finding the provider you wish to apply for a credit card from, you will be asked to fill out an application. Since your business has no revenue, you will most likely be asked to provide your personal income and sign a personal guarantee – a document stating that you will pay any balance on the credit card that your business can’t pay.
The application can usually be completed online and asks for personal information such as your name, date of birth, social security number, annual income, and home address. Additionally, you might be asked to provide business information such as the number of employees, how long you’ve been in business, business category and type, and more.
Equipment Financing
Equipment financing can benefit startups that require expensive machinery or equipment to operate. With equipment financing, the equipment itself serves as collateral for the loan. If you default on your payments, the lender can seize the equipment to recoup their losses. This self-collateralizing nature often makes equipment financing more accessible to startups with no revenue.
How to Apply
The application process is rather straightforward. You will have to provide the lender with information such as your personal details, business information (name, address, tax ID, years in operation, etc.), information about business partners, and equipment specifications so that the lender can evaluate it. This includes the make, model, cost, age, and purpose.
The amount of financing and other terms will be based on your credit (both personal and business), how long you’ve been in business and how the equipment fits into your business plan.
SBA 7(a) Loans
SBA 7(a) loans are a type of small business loan guaranteed by the Small Business Administration (SBA). They are issued by participating lenders and are backed by a guarantee from the SBA. This guarantee reduces the risk for lenders, making them more likely to lend to small businesses, including startups with no revenue.
SBA 7(a) loans can be used for a variety of business purposes, including working capital, purchasing equipment or inventory, refinancing other debts, and even buying real estate.
How to Apply
SBA 7(a) loans have much stricter eligibility requirements than the loan types we already mentioned above. To be eligible for it, you need to:
- Be a for-profit business operating within the US.
- Meet the industry requirements (certain types of business, such as real estate investment firms or gambling businesses, don’t qualify).
- Be a small business
- Show your ability to repay the loan and show your creditworthiness.
- Show you’ve looked at other forms of financing before this one.
- Show the need for a loan and demonstrate how the funds will be used.
- Not be delinquent on any existing government loans.
- Be able to provide collateral if the loan is larger than $50,000.
- Provide a personal guarantee if you own more than 20% of the business.
Additionally, by creditworthiness, the SBA typically means a good personal credit score (690 and over) and being over two years in business.
Some documents you will have to submit in case of this loan include SBA Form 1919, personal background and financial statements (SBA Forms 912 and 413), business license, loan application history, income tax returns, business lease, and business history.
ACH Loans
ACH loans are a type of business financing alternative lenders, banks, and other financial institutions offer. These loans are typically for larger amounts, so they can provide a substantial capital injection for startups with no revenue. Many lenders that offer ACH loans have a minimum credit score requirement that ranges from 500 to 625. Some lenders might not even require a credit score review, making ACH loans a potential option for startups with limited credit history.
How to Apply
As you have no revenue, your focus here should be on showing good personal credit. The exact required documents will vary from lender to lender, but they might include personal income tax returns, proof of residence, a copy of a state-issued photo ID, a social security card, a personal credit report, a business plan, and business bank account statements (if you received any revenue at all).
How to Secure a Startup Business Loan with No Revenue
Now we’ve looked at some of the best options to consider to fund your startup; let’s go into the strategy that will ensure you have the best chance to secure your financing.
Step 1: Understand How Much Finance You Need
Before you set the wheels in motion, you should think about how much funding you need and what you’ll use it for. While this may seem obvious, you want to get that Goldilocks amount. Don’t overstretch yourself but ensure you have enough to get your business off the ground with some additional runway.
Step 2: Prepare a Solid Business Plan
A well-prepared business plan is essential when applying for a startup business loan. It should detail your business model, market analysis, sales and marketing strategies, and financial projections. This will show potential lenders that you have a clear plan for your business’s success.
Step 3: Build and Maintain Good Credit
As we’ve mentioned already, bad credit isn’t necessarily an end to your business dreams, but it still pays to have a good credit score, as it can only increase your chances of securing a loan. Do what you can to keep your credit history in good standing.
Step 4: Consider Collateral or a Co-signer
Collateral can be any asset of value the lender can seize if you default on the loan. A co-signer is someone with good credit who agrees to take on the responsibility of the loan if you can’t repay it. Both these open up more options if you have access to them.
Step 5: Research and Apply
Once you’ve prepared everything, it’s time to research potential lenders and apply for loans. We’ve already given you the lowdown on some of the common no-revenue business start-up loans to get you started. You’ve just got to get the ball rolling.
Should You Get a Business Loan with No Money?
When you have no revenue yet, you might have some doubts about whether applying for a business loan with no money is a good idea. There are several scenarios where it is and several where it’s not – we compiled all of them into a table.
Alternative Ways to Raise Startup Funds With No Money
We’ve spent a good deal of time discussing loans and traditional lending options for startups with no revenue. But it’s worth mentioning that loans aren’t the only avenue to explore. There is a world of alternative funding methods out there that operate a bit differently.
These options can offer you more flexibility, and in some cases, they can even provide opportunities for strategic partnerships or valuable advice. So, let’s shift our focus a bit to these alternative ways to raise startup funds that could open up new possibilities for your business.
Crowdfunding
Crowdfunding has become a popular alternative for startups to turn to when needing a cash injection for their business. Kickstarter and Indiegogo are among the leading online platforms where entrepreneurs can pitch their business ideas to a wider audience for funding. Instead of seeking one or two big investors, you’re appealing to a crowd of potential backers, each contributing a smaller sum but, in the aggregate, meaningful.
And crowdfunding is not just about the money. Granted, funds are your primary concern, but it is an effective way to test ideas in a highly public platform where entrepreneurs can gauge users’ interest in their innovation.
Crowdfunding is challenging; it requires an excellent strategy, a convincing pitch, and massive marketing efforts to generate campaign interest. Additionally, some platforms follow the “all-or-nothing” policy that mandates a startup to reach its funding goals; otherwise, the funds aren’t released.
Seeking Investors
This route isn’t just about securing funds; it’s about forming strategic partnerships that can propel your business forward. Investors, particularly angel investors, can provide more than just financial backing. They won’t just write you a check but can bring a wealth of industry knowledge, experience, and a network of connections invaluable for a growing startup.
Angel investors are typically individuals who provide capital for startups in exchange for ownership equity. They’re known for their willingness to support new ideas and entrepreneurs at the early stages of business development. But while the financial boost and mentorship can be incredibly beneficial, it does mean sharing a piece of your business. So, the question is, are you OK with sharing the reins?
Family and Friends
Sometimes, the support you need is closer to hand. Family and friends can be a valuable source of funding for your startup.
However, mixing business with personal relationships needs careful thought. The pros are clear: potential for flexible repayment terms, lower (or no) interest rates, and a more straightforward process. But the cons are equally important to consider. If your business struggles or fails, it could strain or even damage your personal relationships. Treat any loans from family and friends as professionally as you would with a bank or other lender, including having a written agreement and a clear repayment plan.
Final Thoughts
Securing a startup business loan with no revenue may not be a walk in the park, but it’s definitely possible. Harness that never-say-die attitude and further explore some of the funding options we’ve discussed in this article.
Once funding is secured, the real fun begins. You can start turning those dreams into reality, building your business, and making your mark.
As you do, considering effective payment solutions becomes a key part of your strategy. That’s where we at My Payment Savvy come in. We offer a range of services tailored to startups, from seamless payment processing to comprehensive billing solutions.
We offer flexible payment solutions for all sorts of startups, whether it’s credit card acceptance, debit card processing, an online payment gateway, or ACH payments.
We also understand the value of convenience. That’s why we offer an all-in-one business solution that simplifies managing your payment processing.
With the right funding and the right financial tools from My Payment Savvy, you’re well on your way to making your business dreams a reality.