How to Get a Business Loan With No Money in the Bank

Rapid growth and slow-paying clients often force business owners to get a business loan with no money in the bank.
Feb 2, 2021

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There are so many driving factors behind the search for a small business loan, but the most common of all is to get access to cash so you can nurture your business. If you’re low on cash, it makes a lot of sense that you’d want to apply for financing. So, you’re probably wondering how to get a business loan with no money—if that’s even a possibility.

Getting a business loan with no money

Across industries, a common thread among businesses is the need for capital. Sure, a freelance consultant’s needs are going to be different than a restaurateur’s, but both need money to run their businesses successfully. The catch-22 lies in the fact that lenders often require that you have money in the bank before you can qualify for a business loan to get more money.

You might have disposable funds that you just don’t want to tap into to apply for a business loan. Other times, you just might not have the cash flow a lender is looking for to be approved for a business loan. Whatever the scenario, we’ll take a closer look at how to get a business loan with no money in the bank.

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When you might need to get a business loan with no money

Before we get into exactly how to get a business loan with no money, let’s take a step back:

What are some common causes for a low-to-zero balance in your business bank account?

Figuring out the why can help you know what exactly to do next:

1. You’re waiting to get paid.

Many businesses (almost all B2B companies, actually - including construction, trucking, consulting, etc.) work on a contract basis. As a result, sometimes you need to wait for weeks or months after services are rendered to receive your payment.

As you're waiting, you don’t have the luxury of being able to sit around before you start your next job, contract or project. As they say, "Time is money."  So, you start that next project because, quite simply, you have to.

Until you get paid, you’re still incurring expenses. That's when the funds in your account begin to shrink instead of grow. Cash flow problems associated with invoicing are a problem for many small-business owners.

2. Your business is struggling to scale due to resources.

When you first opened up shop, you probably used startup-sized resources to get your business off the ground. But that small pool of resources you started out with can’t keep up with your growing business.

The truth is, bigger businesses need bigger amounts of capital to thrive. One of a small business loan’s many uses is to provide that additional capital boost. With your loan, you can replenish inventory to meet your customers’ growing demands, hire more employees, even open up a second location—whatever it takes to keep up with your own growth. But if you’ve wiped your original reserves clean, you’ll have a hard time securing that business loan at all.

So, when drawing up your business plan, it’s important to factor in the inevitability of scaling.

You've worked hard to get your business to where it is today; so you want to make sure that, when you kick things into growth mode, a lack of funds doesn’t bring you to a screeching halt.

3. You’ve mixed personal and business finances.

For a whole host of reasons, financial advisors recommend separating your personal and business finances. But this is a tricky issue, and everyone handles it differently.

Depending on your lifestyle, industry and countless other factors, it can be hard to know how much of the money you earn should stay within your business and how much should go to paying down your mortgage. After all, you founded your business on the belief that this is your livelihood: It might have been your dream, but now it’s very much a reality. Even if your personal and business cash flows are indeed separate, it can be tough to view them as such.

Here, too, it’s important to plan exactly where funds will be heading on both a personal and business level. It can be all too easy to pull too much from your business bank account to pay for that mortgage, or any other countless personal expenses you encounter on a daily basis.

A healthy business bank account should never dip below zero, resulting in the dreaded “non-sufficient funds.” In order to avoid this, leave an extra couple of thousand dollars sitting in your business checking account if at all possible.

At the very least, this is a rainy day fund. In its truest form, that cash cushion can mean the difference between success and failure, especially when it comes to getting a business loan with no money down or in the bank.

How to get a business loan with no money: The importance of cash flow

If you’ve applied for a business loan before, or at least looked into it, you likely know that small business lenders often reject candidates who don’t have a cushy bank account balance to back up their applications. But if you need to get a business loan with no money, you should understand why lenders care about cash flow in the first place.

At the most basic level, cash flow indicates the health of your business. Positive cash flow means there’s more money heading in your direction, and a negative cash flow often means a business is struggling.

Of course, you care most about your cash flow in terms of how it’ll affect your day-to-day operations. But as soon as you land in the small business financing market, your solvency is important to lenders, as well. How do lenders determine whether they feel comfortable extending you a loan? In large part, by investigating your cash flow.

How lenders see cash flow and assess risk

As mysterious as they might seem, lenders are actually pretty easy to understand, especially when you’re considering their business loan requirements. One of their most crucial requirements is cash flow.

Some lenders require a certain amount of funds in a potential borrower’s business bank account before they'll even consider extending a loan. Other lenders are a little more forgiving of cash flow, as long as other requirements like personal creditworthiness are strong.

Every time a lender extends a loan, they’re taking a big risk. They need to know that a borrower is able to manage additional debt, and has the financial capacity to repay that debt in full.

So, the terms of a loan are always a reflection of that risk. If lenders deem a business risky, they’ll hike up the interest rate, increase payment frequency and shorten the repayment period. If they view a business as low risk, the opposite will occur.

Low bank balances are a big contributing factor toward a riskier business assessment. A major reason for this is that loans operate on automatic withdrawals. If your loan requires you to make weekly payments of $400 but you never have more than $1,000 in your account, chances are you won’t be able to consistently pay your loan bills in full and on time. Needless to say, this isn’t a good situation for you or the lender.

Overall, it makes sense that lenders construe positive cash flow—or sufficient money in the bank—as an indication of a business’s reliability. And that’s why, on the flip side, it can be tough to get a business loan with no money in the bank.

Getting a business loan with no money: The top 3 options

As you can imagine, it’s tough to get a small business loan with no money. And while it’s unlikely that you’ll be able to secure a traditional term loan or SBA loan with limited funds, you have other financing solutions available to you.

If you're thinking about how to get a business loan with no money, you might have an easier time qualifying for the following financing solutions. And, if you do, these alternative loans can help boost your business’s cash flow, so you can be in a position to graduate to a small business loan that yields even larger amounts of cash.

1. Business credit cards

Your business’s biggest expenses, like payroll and rent, will require loan-sized funds to satisfy. But you can meet the countless other expenses you face daily with a business credit card. Plus, using a credit card responsibly (which, in large part, means paying your credit card bills in full and on time every month) will boost your credit score and help you qualify for more business loans in the future.

Cash flow is important, but credit-card issuers care more about your personal creditworthiness as a crucial factor in the business loan application.

There are countless business credit cards on the market today, and they all come with perks, rewards and features that match the reason you’re looking for funds in the first place.

As we said before (and as you’ve definitely heard before that), it takes money to make money. Using a cash-back business credit card is case in point: Spending in certain categories earns you hard cash, which you can then reinvest back into your business.

2. Equipment financing

The underwriting process for an equipment loan is a little different than that of a traditional term loan. The lender fronts you the cash to fund up to 100% of a piece of equipment, and they use the equipment itself as collateral.

For that reason, lenders are just as concerned with the value of the equipment itself as they are with your business’s financial record. The terms of an equipment loan are based on credit (both business and personal), time in business, and how well the equipment fits into your business plan. Cash flow isn’t a major factor in that decision.

If you’re looking for a new machine, computer or vehicle to boost revenue, it makes a lot of sense to look into an equipment loan.

3. Invoice financing

Invoice financing ties back to a situation we discussed earlier: When you’re waiting to get paid for completed work and expenses keep adding up. Fortunately, there are lenders who can analyze those unpaid invoices and extend funds to you ahead of time, so you don’t need to wait idly by until you get paid.

Like equipment loans, invoice financing is a type of collateralized loan. In this case, invoice finance companies use your business’s unpaid invoices as collateral and, in exchange, they’ll front you 80% to 90% of the missing cash. You'll get the rest, minus the invoice financing company's fee, when your customer pays the invoice.

As with an equipment loan, invoice financing companies are just as concerned with the value of your invoices as they are with your business’s finances. So businesses with limited cash flow might have an easier time qualifying for this type of loan than others.

The best solution to get a business loan with no money

If you’re looking into how to get a business loan with no money, it’s definitely worthwhile to look into these financing solutions. But, in reality, the best course of action is a little less exciting. If you can wait, wait!

You’ll have the best luck getting a business loan with favorable terms when your business’s financials are in order. In the meantime, focus on saving and running a lean business.

Ask yourself: "What costs can I cut without fundamentally undoing what I do best?" You may be surprised by how much your business can save by making a few operational changes. Also, create a specific savings goal and adjust your budget accordingly. Open up a separate business checking account that you automatically transfer funds into intermittently.

Once you build up your business’s cash cushion, both the lending world and your own world will become so much easier to manage.

This article originally appeared on Fundera, a subsidiary of NerdWallet.

Forest Sisk contributed to this article.