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If you’re a business owner looking to secure financing for the startup venture you’re launching, you may find that your lack of revenue is preventing you from getting the financing you need. Well, there are a few options when it comes to startup business loans with no revenue requirements. These loans are designed to enable entrepreneurs to access capital without needing to demonstrate any previous sales or profits.
In this article, we’ll explore the pros and cons of these types of loans and what you need to know before applying.
- While loans for startups with little to no revenue won’t be the best loans as far as interest rates and terms, there are still plenty of options for business owners to choose from.
- The explosion of online lenders in recent years has given brand new business owners a haven for loan options.
- Loans, such as equipment loans, have collateral requirements but are much easier to qualify for, especially for businesses with no revenue yet.
Is It Possible to Get a Startup Business Loan with No Revenue?
In short, yes, getting a startup business loan with no revenue is possible. Is it easy? No. Banks only want to lend money to borrowers who they are sure can pay back the loan. Without any revenue source, it’s hard for banks to trust your word that you’ll be making money soon and can keep up with your repayment schedule.
That said, there’s one key way you can still secure funding, revenue, or no revenue. That’s by putting up collateral on your loan. With equipment loans, for example, the equipment you’re purchasing becomes the collateral. This means if you don’t make continued payments, the lender can seize the equipment and use it to pay off your debt.
Why Traditional Bank Loans Don’t Always Work
Traditional banks get so many loan applications that they can afford to be picky about who they approve. To a bank that bases all of its financial decisions on statistics, a brand new startup with no history of a reliable income isn’t a safe borrower. So often these startups end up getting their loan applications denied.
Pros and Cons of Startup Business Loans with No Revenue
There are a host of pros and cons surrounding startup business loans with no revenue requirements. They’re definitely not the best option for every borrower, but some business owners can find a lot to like about these loans.
Pros of Startup Business Loans with No Revenue
- They provide necessary funding. Startup business loans with little or no revenue requirements can help entrepreneurs get the funding they need to start their businesses.
- More lenient requirements sometimes. Loans with no revenue requirements are often easier to get than traditional loans, allowing entrepreneurs to access capital more quickly.
- Low interest rates for some. Borrowers with good credit can still likely qualify for low interest rates, despite having no revenue.
Cons of Startup Business Loans with No Revenue
- May be difficult to keep a regular payment schedule. These types of loans can be difficult to pay back without a steady revenue stream
- High interest rates balance out risk. These loans can also be more expensive in the long run because of their high interest rates.
- Collateral will likely be required. Some lenders may require collateral in order to secure the loan, which can be difficult for startups to provide.
How to Get a Startup Business Loan with No Money or Revenue
Many business owners wonder how to get a business loan with no revenue, as most traditional banks won’t provide the funding they need. Thankfully, it’s not too complicated of a process.
Step One: Review Your Assets
Know right away that having other assets is one of the easiest ways to qualify for a loan when you have no revenue. So, take inventory of any assets that you have that can be used as collateral for a loan. This may include cash, stocks, bonds, and other investments. Additionally, consider any real estate or other physical assets you may own that can be used as security for a loan.
Step Two: Calculate How Much You Need to Borrow
Before you apply for a loan, you’ll need to determine how much money you need to borrow in order to start and/or grow your business. Consider the costs associated with launching your business, such as equipment and payroll, and then calculate how much money you need to cover these costs.
Step Three: Research Lender Requirements
Different lenders have different requirements for obtaining a startup business loan, so it’s important to research the lender's specific requirements before applying. Make sure you understand the terms of the loan and the interest rates, as well as any other fees associated with the loan. Additionally, some lenders may require a personal guarantee or collateral for the loan, so make sure you understand the lender's requirements for these as well.
Step Four: Assess Repayment Ability
You should never take out a loan you can’t afford to pay back. Before you decide on a final lender, look at your business plan and financial projections to determine how you’ll be able to pay back the loan. Consider factors such as how much money you expect to make from sales and how long it will take you to reach profitability.
You’ll also need to consider how much money you’ll need for living expenses during the early stages of your business. By assessing your repayment ability, you’ll be able to determine if you’re financially able to take on a loan.
Step Five: Understand the Risks
When you’re considering taking out a startup business loan with no revenue, you should understand the risks associated with doing so. There is a higher risk of default and not being able to pay back the loan. You should also understand the interest rates and any other fees associated with the loan, and make sure that you are comfortable with the terms before signing any loan documents.
Step Six: Complete the Application
After you’ve gathered all the documents you need, you’ll need to actually fill out the application for the loan. This will involve filling out a lot of personal and business information. With online lenders, you’ll take about 5 - 15 minutes to fill out all of the info and then you’ll have to wait at least 24 hours for an answer.
The Best Startup Business Loans with No Money or No Revenue
Starting a business can be expensive, but many entrepreneurs don’t have the financial resources to get their businesses off the ground. Fortunately, there are several startup business loans that can help entrepreneurs cover their costs and get their ventures up and running.
SBA 7(a) Loans
The Small Business Administration (SBA) 7(a) loan is one of the most popular startup business loans that require no revenue. This type of loan is backed by the U.S. government, so it offers attractive terms, such as no collateral, low interest rates, and long repayment terms.
Online Business Term Loans
Online business term loans are a great alternative for entrepreneurs who don’t have the money or revenue to qualify for a traditional loan. These loans are sometimes unsecured and provide quick access to capital. Note that excellent personal and/or business credit is required to get approved for these types of loans.
If you're ready to jumpstart your entrepreneurial dreams, explore startup business loans from our highly recommended online lenders, offering the lowest monthly revenue requirements to help you secure the financing you need with ease:
GoKapital is a recommended source for online startup funding, as they require a modest $50,000 annual revenue, which translates to just $4,000 in monthly revenue.
Merchant Cash Advances
A merchant cash advance is a loan that’s based on a percentage of a business’s future sales. This type of loan is ideal for startups and small businesses that don’t have a lot of money or revenue. Additionally, merchant cash advances can be fairly easy to qualify for and come with quick access to funds.
Business Lines of Credit
Business lines of credit don’t require any collateral, and they provide a steady stream of capital that can be used as needed. Business lines of credit can be used to cover operational costs, purchase inventory, and more. They operate similarly to credit cards where your credit line becomes available again once you’ve paid down the balance.
American Express® Business Line of Credit offers funding ranging between $2,000 and $250,000 to startup businesses with an average monthly revenue of at least $3000. However, all businesses are unique and are subject to approval and review.
Business Credit Cards
Business credit cards offer a variety of features and benefits, such as cashback rewards, low interest rates, and flexible repayment terms. Additionally, many business credit cards offer introductory 0% APR periods, which can offer a great way to finance your startup without the burden of interest payments.
Equipment financing is a great option for entrepreneurs who need to purchase equipment for their businesses. This type of loan is secured by the equipment itself and can be used to purchase machinery, vehicles, and other necessary equipment for the business. Equipment financing can be used for both new and used equipment, and it usually has low interest rates and flexible terms.
Microloans are small, short-term business loans that are an ideal option for startups with no revenue because they’re more lenient in their approval criteria. Microloans are often offered by non-profit organizations and can help startups bridge gaps in financing.
ACH loans are similar to microloans, but are offered by banks and other financial institutions. ACH loans are usually for larger amounts, therefore they may have more stringent approval criteria, but they can provide much-needed capital for startups with no revenue.
Should You Get a Business Loan with No Money or Revenue?
When it comes to taking out a business loan with no money or revenue, there are both pros and cons to consider. On the plus side, a business loan with no money or revenue requirements can provide the necessary funds to get a business up and running, or provide a much-needed cash infusion to keep it going. This can be especially beneficial for startups and other businesses that may not have the financial resources or credit history to qualify for a traditional loan.
However, it’s important to consider the potential risks involved in taking out a loan when you have no current revenue. Without a steady stream of income, it can be difficult to make loan payments and the business could be at risk of defaulting on the loan. Additionally, the interest rate on these types of loans is often higher than on traditional loans, so it’s important to understand the total cost of the loan before signing any paperwork.
Overall, taking out a business loan with no money or revenue can be a viable option for some businesses. If your business is still in the early stages of development and you don’t qualify for a traditional loan, this type of loan may be your best and only option. However, it’s important to do your research and consider the full costs of going this route.
Alternative Ways to Raise Startup Funds
If you’re not a fan of the options for business loans with no revenue requirements, there are a few other ways you may be able to secure the funding you need to get your business to where it needs to be.
Crowdfunding allows you to raise money from a large number of people, often through online platforms such as Kickstarter or IndieGogo. Crowdfunding can provide a great source of capital for businesses that are just starting up with no money or no revenue, just make sure you’re ready to lay out a concrete plan so those giving you money can be sure it’s going to a just cause.
Personal loans allow borrowers to borrow up to a certain amount of money for any purpose, and they typically come with lower interest rates than business loans. It is important to note, however, that personal loans may require a good credit score in order to qualify, so it is important to check your credit score before applying. Additionally, personal loans may have more stringent repayment terms than other types of financing, so make sure to read the fine print before taking out a loan.
Another option for startup business loans with no money or no revenue is to seek out other investors. This includes angel investors, venture capitalists, and other private investors who may be willing to provide capital to your business. These investors may be more likely to invest if they believe in your business idea and have confidence in your ability to succeed. Again, be prepared with a lengthy business plan that answers any potential questions investors may have.
Small business grants are a great way for startups to access capital without having to make any payments. These grants are often offered by government agencies, nonprofits, and other organizations, and they can provide a great way to get the funding you need to get your business up and running.
However, it is important to research the qualifications required to receive a grant before applying, as many grants require a certain level of need or proof of a successful business plan.
Family and Friends
If you’ve exhausted every other option, it may be time to turn to your family or friends. While you should treat any money they give you as another investment that you plan to pay back, you’ll likely find that your family and friends have way more lenient requirements and may be willing to offer funding even if you don’t have good credit or revenue yet.
Business Monitoring Organizations That Could Help
When considering startup business loans with no revenue requirements, it can be helpful to look for assistance from business monitoring organizations. These organizations typically offer resources and guidance to help entrepreneurs navigate the loan process and better understand their options.
- The Small Business Administration (SBA) is one of the most well-known business monitoring organizations. The SBA offers a wide range of business loan products and can provide guidance on which option is best for a particular business. Additionally, the SBA can help entrepreneurs understand the eligibility requirements and other details of the loan process.
- The National Association of Small Business Owners (NASBO) is another organization that can help entrepreneurs who are looking to secure a loan without revenue requirements. NASBO provides resources and guidance on loan products, eligibility requirements, and the loan process in general. Additionally, NASBO can provide assistance with finding a lender who may be willing to offer a loan with no revenue requirements.
- The International Business Innovation Association can provide additional support for entrepreneurs seeking loans with no revenue requirements. InBIA can help entrepreneurs identify potential lenders who are willing to work with startups, as well as provide resources on loan products and the loan process.
Startup business loans with no revenue requirements can be a great way for entrepreneurs to access the funds they need to get their businesses up and running. While these types of loans can be difficult to obtain, they can offer entrepreneurs the flexibility to pursue their dreams without worrying about meeting strict revenue requirements.