The Best Options For Startup Business Loans With No Revenue

Getting a business loan with no revenue sounds like it’s out of reach when you’re familiar with lenders asking for balance sheets, annual profits, and bank statements. Without the revenues to prove that you’re good for the money, it’s difficult to get an approval.

Even when you do find a lender that’s willing to work with a start-up, you’re going to need good credit and it might be expensive to borrow the funds you need. But how else are you supposed to fund your business venture if you don’t have the revenue to show for it? 

In this article, we’ll cover the ways you can find a startup business loan as well as a few other startup financing options. 

Can You Get a Business Loan With No Revenue?

Without the revenue to prove that you can make timely repayments, you might find it difficult to get a startup business loan. But that doesn’t mean it can’t be done. You can absolutely get a small business loan without revenue. Will it be a large SBA loan? Probably not. 

It’s important to know that some lenders do offer loans to small businesses without any prior revenue to show for it. 

You’ll have to meet certain requirements and work with lenders who specialize in that type of financing. To get unsecured business loans, you’ll definitely need to have good credit. 

However, this doesn’t mean you’ll get the same loan terms as an established business. 

Unestablished businesses often get have higher interest rates and stricter repayment terms for their loans. 

If you can’t qualify for a small business loan, other options can help you move closer to your goals. We’ll talk more about those further in this article. 

How Can I Finance a Small Business With No Money?

Without the stability of a padded small business account, you’ll probably face rejection from traditional lenders. Even with the lowered credit requirements on loans from the Small Business Administration (SBA), it’s going to be a refusal without the profits or collateral to back it up. 

So you’ll have to follow a few steps to find the right small business financing from alternative lenders. To make the process as easy as possible, you should gather the typical documents that a lender would request from you during this process to avoid any underwriting delays. 

Documentation requirements will differ from lender to lender, but these are the most commonly used ones: 

• Business plan
• Financial projections
• Tax returns for business and personal 
• Employer Identification Number (EIN)
• Business permits and licenses
• Contracts and agreements
• Aging accounts receivable and accounts payable
• Payroll
• Bank Statements
• Proof of any collateral being used
• Drivers License
• Insurance plans for the business

Keeping these documents handy during your search for small business loans will help you streamline the process. Even if you don’t need some of these, it’s better to have more than what they’re asking for as opposed to less. 

Now let’s get into the steps you’ll need to take to make this happen.

How to Get a Startup Loan With No Revenue

There are several ways to acquire business financing without the revenue requirements that come with a typical business loan. 

Here are a few steps to find the best small business loans from alternative lenders. 

Step 1 – Know Where Your Personal Credit Stands

The way you manage your personal finances is pretty close to how you’ll manage your business finances. At least that’s how lenders think. Having bad credit means you’ll qualify for much less than a small business owner with good credit. That’s true whether you have revenue or not. 

There’s no getting around a credit check when you’re looking for a small business loan. So checking your personal credit helps you determine what startup funding options are at your disposal. 

Are you working with an online lender with lower credit standards and higher interest rates? Or a more traditional lender with better loan terms? This depends on what your credit score is. With bad credit, it might be best to use some collateral to back potential small business loans.

Knowing where your credit score stands is the first piece of the puzzle. 

Each credit bureau receives different information from creditors. So it’s a wise move to go directly to the source by visiting each credit bureau for a credit report. 

When you don’t have the revenue to support your request for a business loan, you’ll have to meet certain credit requirements. So poor credit won’t get you the results you’re hoping for. 

Credit requirements are different with each lender, but it’s worth noting that bad credit drastically reduces your options for an unsecured business loan. For reference, good credit is considered any score above 670, while poor credit is any score of 579 and below.

Although you’ll be using your personal credit to help qualify for the loan, there are a few ways you can avoid using it to build business credit. 

Step 2 – Check Your Business Credit

Your business credit is important too! While lenders do consider your personal credit score as part of your application, your business credit score is considered as well. And it’s not just the score, it’s what’s on your business credit file. Late or unpaid accounts typically yield bad credit.

If your startup business is brand new, you likely haven’t built any relationships with vendors or started any tradelines yet. This is essential to building your business credit. Luckily, there are plenty of companies that help you build business credit while handling your business needs. 

For example, you can open a net 30 account with an office supply provider who reports your on-time payments to at least one credit bureau. You get the office supplies you need and your business credit score gets boosted in the process. 

If you’ve already established tradelines, then you’ll want to check your business credit score to ensure that nothing is going to hold you back on that end. You can do this through Dun & Bradstreet or Experian. 

Step 3 – What’s My NAICS Code? 

Industry matters. So when you’re looking for small business loans, you’ll need to know your NAICS code. Confused about what a NAICS code is? 

It’s the North American Industry Classification System (NAICS) and it helps financial institutions identify your business industry and the level of risk associated with it. This is done by assigning a six-digit code to each industry and there are over a thousand industries to choose from. 

The first time you saw a NAICS code was likely when you applied for your EIN. This code might seem small, but it says a lot about:

• The business models used by similar companies in the industry
• What risks are involved
• Future projections on where the industry is headed overall 

For example, if you own a high-risk business like a restaurant or hotel, you can expect decreased eligibility when you apply for small business loans or other business funding. That might also equate to marginally higher interest rates.  

Step 4 – Find A Lender That Likes Start-Ups

Traditional banks might not be the best resource for startup business loans with no revenue. Instead, you should look for lenders that work with start-up companies. This usually opens up options like invoicing financing and merchant cash advances.

Normally, lenders require at least two years in business to qualify for a small business loan. Some online lenders might approve small business startup loans after six months in business. So you’ll have to find one that doesn’t have a hefty “time in business” requirement. 

It’s there for a good reason though. 

The number of years a business has been operating speaks towards how they’re able to support themselves in the long term. Without a proven track record, there’s no guarantee that the lender you work with will get their money back. Making it a much higher risk for them. 

That’s why it’s important to find a lender who’s willing to work with start-ups. Financial institutions offering loans for new businesses without collateral have some fail-safes in the absence of a stellar track record and loan collateral. 

In these situations, the lender will typically require one or both of these loan agreement terms: 

• Personal guarantee
• Blanket UCC lien

A personal guarantee holds you personally responsible for the loan amount if the business can’t meet repayment obligations. The blanket UCC lien also allows a lender to seize business assets to cover the rest of the loan amount if the business can’t repay it. 

Step 5 – Try A Personal Loan If Your Business Doesn’t Qualify

Getting a business loan is a great benchmark for a new business, but it requires a lot of documentation a start-up might not have. There are also significant barriers to entry if you have bad credit. And let’s not forget about the interest rates that can make the funding unattainable.

If you’re not able to qualify for startup loans, it’s not the end of the world. When all else fails, a personal loan could make up part of the funding for your business. 

With good credit, borrowing money with a personal loan won’t cost an arm and a leg. According to Bankrate.com, the average personal loan interest rates range from 3% to 36%. The rate you get will still depend on important factors like your debt to income ratio and credit score. 

See why step one was so important? If you’re working with bad credit, you could better your chances of getting an affordable personal loan by using CreditStrong’s credit builder account. In as little as three months or less, you can start seeing improvements in your credit score.

All it takes is on-time payments and a quick application process to get on the road to better credit. Learn how CreditStrong can help you reach your goals with their personal credit builder loans. 

Alternatives to a Startup Business Loan

So you’ve exhausted your search for a small business loan. You’ve done all the legwork, just to find out that you don’t qualify. It’s tough to hear, but know that it’s not the end of the road. There are still other alternatives to getting a startup business loan. 

There are even some that don’t require a credit check.

Business Credit Cards

Business credit cards are a great alternative financing option for smaller capital needs. It doesn’t require any collateral and you may be able to find one with bad credit. However, if you’re looking to buy large equipment or need to cover employee payroll, this won’t cut it. 

A business credit card is a revolving credit line that allows you to handle incidental purchases for your business with the swipe of a card. You’re assigned a set credit limit that shouldn’t be exceeded.

As long as you’re using it responsibly and paying off the balance each month, you’ll be able to continue using the power of your credit limit to cover business purchases. 

Unsure if you can pay off your balance each month? It might be best to find a term loan instead since the interest on credit cards is pretty high in comparison.

There are certain credit standards you’ll need to meet for this one. Typically, banks and financial institutions look for a credit score of at least 670 for the best credit card approval rates. 

Personal Loans

Personal loans are a step above a credit card. It’s considered a term loan. Here, you’ll find a total loan amount that gets distributed to you in full. It’s not revolving, so you’ll need to apply for another loan if you run out of funds. 

From there, you’re responsible for making payments on the loan each month until the end of the loan term. Most loan terms range from 12 months to seven years and the length of the term usually correlates with the interest rate. Longer loan repayment = higher interest. 

As we discussed earlier, the interest rates can go from 3% to 36%, so it’s still important to have your personal credit in the clear to qualify for an affordable personal loan.

The thing about this is that since it’s not connected to your business, the payments you make on it each month aren’t building your business credit.

Crowdfunding

A good crowdfunding effort might allow you to completely avoid the need for a startup loan. There’s also a dual purpose of conducting market research by introducing your product to a wider audience through the internet.

Crowdfunding takes a bit of effort to gain traction. Putting together a quality crowdfunding campaign can take time and resources to achieve. Still, there’s no guarantee that your product or service will take off. 

If you manage to run a successful crowdfunding campaign, you’ll have to meet your goal amount and maybe more! However, most crowdfunding sites will refund your donors if your fundraising goal isn’t met by the deadline. Making it an all-or-nothing affair. 

The other downside is that you’re not going to get the full amount if you do reach your goal. The site you hosted the fundraiser on will want their cut. Usually, that’s anywhere from 3% to 5% of the funding raised. 

If you think crowdfunding is still a good option for your startup business, you can try sites like Kickstarter, GoFundMe, or Indiegogo. 

Angel Investors

Angel investors are high net worth individuals who make it their business to provide financing for small businesses. While the name implies that they do it out of kindness, they also do it in exchange for a percentage of ownership in your company.

Usually, these investors will want to see a solid business plan along with a disclosure of any debts and cash flows. This is to determine whether they’re making a good investment. So you can still be rejected if your plans and projections don’t meet their expectations. 

Working with an angel investor does come with a lot of perks though. Since they have a stake in the company, it benefits them to see you succeed. They’ll often offer their expertise, industry connections, and support in hopes that you’ll be successful.

No need to worry about bad credit here. They specialize in working with companies that can’t get traditional financing. 

Equipment Financing

Do you have a startup business that requires large equipment to function? Then equipment financing might be a good option until you have more money in reserves. Essentially, this uses your equipment as collateral to back the business loan. 

So if anything goes wrong and you’re unable to repay the equipment loan, then the equipment would be repossessed and sold to help repay the debt. Equipment financing is easier for a startup business to get approved for. 

Why? Because using the equipment as collateral allows lenders to lower the risk of working with a business that has little to no cash flow. This makes equipment financing a great option even if you have bad credit. 

The Bottom Line

Overall, finding a loan for your startup without revenue or collateral is a process. While it’s more difficult than pursuing traditional lending, it’s still worth it when you don’t have to put your personal assets on the line. 

When you know what to expect for your credit scores and your industry, it’s easier to find a lender who can support your small business loan.

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