It’s possible for small-business owners to find financing that doesn’t depend on cash flow. But if you need to get a business loan with little to no money, the best choice may be to wait — if you can afford to.
You’ll likely qualify for better terms once your business’s financials are stronger. Waiting won’t always make sense, though. If you need a small-business loan now, here are options that may be available without money or revenue.
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Business loans with no money, low income or no revenue
It’s unlikely you’ll be able to secure a traditional term loan or SBA loan with limited funds. But you may be able to get these other financing solutions without money in the bank or revenue.
Business credit cards
A business credit card can boost your credit score and help you qualify for more business loans in the future if you use it responsibly (which, in large part, means paying your credit card bills in full and on time every month).
Cash flow is important to credit card issuers, but many tend to care more about your personal creditworthiness. You’ll likely need good personal credit (a FICO score of 690 or above) to qualify for most cards. Business credit cards can be especially useful for startups with no revenue.
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 the purchase of a piece of equipment, and the equipment itself is collateral.
For that reason, lenders are just as concerned with the value of the equipment as they are with the business's financial performance. 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.
Invoice financing
Invoice financing uses a business’s unpaid invoices as collateral. In exchange, invoice financing companies will front you a percentage of your unpaid invoices
Invoice financing companies are just as concerned with the value of the invoices as they are with the business’s finances. So businesses with limited cash flow might have an easier time qualifying for this type of loan.
Microloans
Microloans are smaller loans (typically of up to $50,000 or less), and the lenders usually are nonprofit organizations and mission-based organizations. These loans tend to be low cost and are often for businesses in disadvantaged communities.
How to get a small-business loan with no money or revenue
Businesses need capital for many reasons, but all lenders want the same thing: for you to be able to repay their loan. If you don’t have enough revenue to make a lender confident this will happen, there are still ways to get a business loan.
- Assess your assets. Every time a lender makes a loan, it takes a risk. They need to know that a borrower can repay that debt in full. Lenders often determine this in part by whether you’re generating revenue. If you aren’t, consider what other positive attributes — for example, collateral or your personal credit — you can offer a lender to make you look like a safer bet.
- Know a lender’s requirements. Some lenders require borrowers to have a certain amount of money in their business bank accounts before they'll even consider extending a loan. But other lenders are a little more forgiving of cash flow if borrowers have strong personal creditworthiness or meet other requirements. Make sure you know what a lender is looking for before you apply.
- Determine whether you’ll be able to repay. Low bank balances are a big factor in assessing risk. A major reason for this is that lenders like automatic withdrawals. If your loan requires weekly payments of $400, but you never have more than $1,000 in your account, a lender may be wary of your ability to make full loan payments on time — and you should be, too.
- Understand your own risks. Loan terms reflect risk. If a loan is risky, the interest rate and payment frequency may be higher and the repayment period may be shorter. If you’re not confident you’ll be able to repay a loan without money in the bank, you may end up having to borrow more to pay off your existing debt. Breaking out of that debt cycle can be difficult.
Should you get a business loan with no money?
It may make sense to get a business loan with little to no revenue in the following instances.
You’re waiting to get paid
Many businesses (almost all B2B companies — including construction, trucking, consulting, etc.) work on a contract basis and sometimes need to wait weeks or months after services are rendered to receive payment.
However, these businesses don’t have the luxury of waiting to start the next job, contract or project, which incurs expenses. That's when cash flow problems begin and an option like invoice factoring or financing can make sense.
You need resources to grow
Startup-sized resources can’t keep up with a growing business. Bigger businesses need bigger amounts of capital, which is why small-business loans are so important. They can help replenish inventory, hire more employees or open additional locations.
If you’re a startup with no revenue — but with a strong financial forecast — you may want to look at options like microloans and business credit cards to inject some money into your business.
Your personal and business finances are mixed
It’s hard to separate personal and business finances. And even if your personal and business cash flows are indeed separate, it can be tough to view them as such.
It can be all too easy to pull too much from your personal account to pay a bill for your business or other seemingly one-off expenses. This could result in the dreaded “non-sufficient funds” for your personal account and signify that you need to find dedicated capital for your business.
Alternatives to getting a business loan with no money
The best alternative to getting a business loan with no money is waiting, but that won’t be practical for everyone. Here are some other options to consider:
If you’re a pre-revenue startup: Consider zero-debt financing options that let others invest in your idea, such as crowdfunding or offering equity.
If you’re a more established business: See if you can qualify for a small-business grant. Not every business will — and competition can be fierce for this free money — but funding is available.
It can also make sense to 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 easier to manage.
A version of this article originally appeared on Fundera, a subsidiary of NerdWallet.
Forest Sisk contributed to this article.