If you’re a small business owner, you’ve probably heard it said that it takes money to make money. A cash infusion may help stabilize your business or propel you forward. However, if you don’t have revenue, you may assume that you cannot get a loan, but that’s not always the case.
In place of revenue, some lenders may be willing to consider collateral, the strength of your business plan, and/or your personal income. While it’s not easy to get a business loan without revenue, it’s not impossible.
Learn more about how to secure funding without revenue and how SmartBiz Bank® may be able to help.
When should you consider a loan if you have no revenue?
It’s important to note that taking out a business loan with no revenue may be risky. It comes with more scrutiny and almost certainly involves more personal risk. However, depending on a few factors, it may be a viable option. The following scenarios are times when you should consider a loan, even if you have little to no revenue:
- Invoice Delays: Problems with cash flow are common if your company relies on invoices. Some clients may take weeks or months to pay. Proof that you’re owed money may be enough to prompt a lender to issue you a business loan.
- Scaling Needs: When your company sees an increase in business, you may need to scale quickly to meet the demand. If your current assets aren’t worth enough to support this growth, you may be able to obtain a business loan based on a verifiable increase in business.
- Commingled Finances: Mixing your business and personal finances makes you more vulnerable if your business goes through a slow period. Getting a loan may help you get out of a personal hole, but it’s wise to create a buffer between your company’s money and your own.
7 options for a business loan with no revenue
There are several loan options for potential borrowers without revenue, but you should be careful as you compare them. Some of these options rely heavily on your personal finances being in a strong enough position to guarantee repayment.
1. Traditional bank term loan
A traditional bank term loan is generally a great option given its comparatively reasonable interest rates and long repayment terms. That said, applying for one may be slightly challenging, especially for business owners with minimal revenue, given the qualification criteria.
However, it may not be impossible to get a loan if you fall short of those criteria. Some lenders may consider allowing you to put up collateral.
2. Equipment financing
As the name suggests, equipment financing is a way to fund the purchase of new machinery or the repair of old equipment. These loans may be easier to qualify for than many other small business loans because the equipment itself serves as collateral.
That reduces the lender’s risk, generally enabling them to qualify more borrowers, potentially including no-revenue businesses. If you’re eligible for this type of loan, your funds will typically cover 80% to 100% of your equipment expense.
3. Business lines of credit
A business line of credit is a revolving loan, similar to a credit card, and it is not an installment loan. That generally means you get a lump sum of capital to draw from at your own pace. In other words, you can typically use up to a maximum amount and only pay for what you use. Once you repay your outstanding account balance, all that money typically becomes available again.
Credit lines generally come with limits based on your annual gross revenue. However, there may be options for lines secured solely with collateral to give no-revenue borrowers a chance to qualify.
4. Business credit cards
A business credit card is essentially a business line of credit in a physical, tangible form. Unlike some credit lines, though, business credit cards lack a date after which you can’t use them anymore. Additionally, the application process often doesn’t require business documentation to prove your monthly or annual revenue, making qualification easier. That said, in most cases, business lenders generally require a minimum credit score of at least 670 to qualify for their credit cards.
It’s important to note that business credit cards typically come with higher interest rates than some of the other options. Those interest rates have the potential to cut into monthly cash flow, so business credit cards should be used responsibly.
5. Invoice financing and factoring
You may have no revenue right now, but with abundant outstanding invoices, you could likely qualify for invoice financing or factoring. Your outstanding client invoices, which form your future revenue, will typically be the basis of your loan.
Invoice financing is when a lender advances you around 80% of the aggregate dollar amount of your outstanding invoices. You’ll generally get the remaining 20% once the client repays their invoice, minus the lender’s fee.
On the other hand, invoice factoring isn’t exactly a loan. Instead, you’ll sell your unpaid invoices at a discounted rate to a factoring company. This company will then take over your collections process and keep the money from your invoices.
Companies that offer either option are generally more concerned with the value of the invoices than with your company's financial health. As a result, they’re typically both nice options if your business lacks revenue.
6. Friends and family funding
If you’re not in a position to apply for a more traditional loan, friends and family may be a viable funding source. Of course, everyone’s circumstances are different as not everyone’s close associates have the money to lend. But even a little bit of money can generally help your business. Be cautious, though; using a loved one's money for your business may easily strain the relationship if you end up unable to repay them.
7. Crowdfunding
You can typically use several online platforms to raise money from the public in exchange for several tiers of rewards they can earn. This approach, though, can be less reliable than other financing methods. You’ll have to set a monetary goal and reach it before seeing any of the money. Of course, there is no guarantee that you will reach that goal. But if you do, crowdfunding will likely be less expensive than taking out a loan because there are fewer fees. That said, the right loan for your business doesn’t generally have to be very expensive.
How can SmartBiz Bank help?
If you’re applying for a business loan without revenue, you’ll need a lender who is willing to work with you to get the funds that you need. Find out if you pre-qualify with SmartBiz Bank® today.
FAQs
Which lenders offer loans to startups with no income?
Startups without revenue may find financing through online lenders, community banks, and programs backed by the SBA. Some lenders focus on early-stage businesses and evaluate factors beyond revenue, such as credit history, business plans, and industry experience. Microloan programs and nonprofit lenders may also be more flexible for newer businesses. Availability can vary, so it is important to research lenders that specialize in startup financing.
What requirements do you need to qualify without revenue?
Without revenue, lenders typically look more closely at other indicators of risk and potential. These may include your personal credit score, professional experience, business plan, and financial projections. Demonstrating a clear path to revenue and strong financial management can help strengthen your application. Having organized documentation and a well-defined growth strategy is often essential.
Do you need collateral or a personal guarantee?
In many cases, lenders will require either collateral or a personal guarantee when a business has no revenue. A personal guarantee means you agree to be personally responsible for repaying the loan if the business cannot. Collateral, such as equipment or other assets, typically help reduce lender risk. These requirements are common because they provide additional assurance in the absence of established business income.
