Startup Business Loans with No Revenue
March 5, 2023 | Merchants | Dustin
Can you get a business loan with no revenue?
For any business looking to get a loan, your revenue stream is proof that your business is running successfully. Lenders look at your business’s revenue as a means to understand the risk involved with giving a loan. However, with startups it’s a different story.
If you are beginning a startup, by its very nature you don’t have years of financial history to share with a bank or private lender. But not to worry, there are other options. The three most common ways to show you are capable of repaying a loan for a startup are private income, co-signing, and pre-sales.
Get A Startup Business Loan with No Revenue
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If you want a business loan with no revenue, private income can be used in place of your business’s financial history to show proof of cash. This way if your company takes longer than expected to start making profit, you’ll have the fallback option of your personal funds to repay the loan.
Get A Cosigner For A Startup Business Loan
Another option to qualify for a startup business loan is to have a cosigner. The more parties that are responsible for paying back a debt, the safer it is for a bank. Co-signing is a common practice for hedging risk, especially student loans which are given to college-age young adults who aren’t expected to repay them immediately.
It’s a similar situation when it comes to startups; banks want to have a secondary payment option just in case the business itself isn’t as successful as you envisioned. You should find someone who has confidence in your business model or truly willing to pay back the loan if you are unable to.
Business Loans with No Collateral
Similarly, you can get a startup business loan with no collateral a few different ways. The first is by asking the government for assistance with an SBA loan aka Small Business Administration loan. This administration was set up to help new businesses and sole proprietors finance early stages of growth. To apply for an SBA loan, review the process on sba.gov and take a look at this fact sheet to learn more.
As mentioned above, another way to get a startup business loan without collateral is to show that your product is already selling. Pre-sale is a common technique new businesses use to hedge costs when it comes to early production.
If you’re selling a new product, you may want to start a profile page for your product on Kickstarter or Indiegogo. These sites allow you to showcase a new item and accrue sales before the product is even created. Visitors on these sites have the first go at brand new products and entrepreneurs can gauge the success of their big idea before spending anything on production.
A bank or lender can look into your pre-sales to determine if you will have the money to pay back the loan later on. This is a common strategy on the show Shark Tank where startups are interviewed by angel investors to determine if they’re worth funding. One of the most common questions is, “how many items have you already sold?”
Startup Business Loans with No Credit
If you’re in need of a startup business loan with no credit, you’ll want to find a group of angel investors, a crowdfunding network, or a lender who can extend you a business line of credit.
Angel Investors are individuals who want to make money based on either making interest of a loan or percentage ownership in your business. If you have an idea or concept, it’s important to establish a path to make money on it before approaching angel investors. Many have heard thousands of ideas, so the faster path you can prove to them that puts money in their pocket, the more luck you’ll have getting funded.
Crowdfunding is another way to raise capital with no credit. However, many crowdfunded campaigns need to meet a certain threshold before paying out, so be sure you find one that pays incrementally or make sure your funding goal is consistent with the support you are expecting.
Lastly, business lines of credit are standard issue credit cards that have limits based on your personal history. If you have a new business, the credit limit may be low, but it should be enough to get you off the ground for basic items like computers or even a co-working space.
March 5, 2023 | Merchants | Dustin