How To Get a Startup Business Loan With No Money: Step-by-Step Guide

PeopleImages / iStock.com

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

If you have a talent or an idea and want to turn it into a business, you’ll most likely need a loan to get started. Combining traditional and alternative lending is the best way to obtain the funds needed to turn your dream into a reality. Read on to discover where to look for startup loans to get your company up and running.

Can You Get a Business Loan With No Money?

Business loans are hard to get if you have no money at all to invest in your business. That’s because lenders need proof of your business’s financial solvency as an assurance of your ability to repay the loan. One of the ways it measures that is by the amount of equity you have in your business.

On average, you’ll need 10% to 30% equity. But the equity doesn’t have to be cash in hand. Money you’ve already spent on your business might’ve created equity.

You can also use personal equity, such as:

• Money gifted to you.
• Proceeds from a home equity loan or line of credit you can repay with your spouse’s salary.
• Funds from a retirement account.

How To Get a Startup Business Loan With No Money: 5 Steps

A strategic approach to getting a business loan will improve your chance of success.

Step 1: Build a Strong Business Plan

When applying for a loan, you’ll need a detailed business plan. Here are some points to know:

• Your business plan will show the lender you have carefully considered all the startup expenses associated with your business and researched the product or service demand to ensure you’ll make a profit.
• This plan must be done right if you are going to pitch your business to a lender when your business hasn’t even launched yet.
• In addition to your expenses and expected income, include a projected repayment plan that corresponds with your expected growth.
• Don’t forget to include what makes your business different from others and exactly how it will have an impact on the community or others it caters to.

Step 2: Improve Your Credit Score

You’ll be more likely to land a business loan when you have a good credit score.

A good credit score also qualifies you for a lower interest rate, which means you’ll have more money at your disposal to put into the day to day operations of your business.

Pro Tip

If your credit score could use some improvement, consider doing the following:

• Check your credit report and have any inaccuracies corrected.
• Reduce your outstanding debt.
• Avoid opening new lines of credit until you’re ready to apply for your business loan.

Step 3: Explore Government and Nonprofit Programs

Grants, SBA-sponsored microloans and state and local government business support provide startup funds. These might be easier to qualify for than a standard business loan.

Your local Chamber of Commerce is a good resource for locating these opportunities.

Step 4: Consider a Co-Signer or Business Partner

Taking on a partner who has good credit and cash to invest in your business will help you qualify for a business loan.

Alternatively, a co-signer with good credit can help you qualify for a personal line of credit that you could use to fund your startup costs.

Step 5: Start Small With Business Credit

Suppliers and other vendors often extend short-term credit to their business customers. That trade credit and a business credit card could help you preserve cash flow while you build the equity needed to qualify for a business loan.

6 Best Startup Business Loans With No Revenue

By starting a small business, you might be contributing positively to the economy, but you’ll need money to get started. The following loan sources can provide those funds.

1. Microloans

Some nonprofit organizations provide microloans of up to $50,000 to new businesses. These are short-term loans with lower interest rates.

Depending on the organization, you might also get additional support beyond the funding.

• Accion offers a financial literacy program and some business training along with its loans.
• Kiva issues interest-free crowdsourced loans of up to $15,000, as well as free marketing support and aid in building your business credit.

2. Business Credit Cards

Business credit cards can be an attainable resource for startups. Cardholders can request a cash advance if needed. In addition, the card itself can be used to purchase office equipment, inventory and advertising expenses.

One benefit of a business credit card is that you can qualify for it based on your personal creditworthiness. And you don’t have to be incorporated — sole proprietors like freelancers and gig workers are eligible.

Good To Know

When choosing a business credit card, consider one with a low or 0% introductory APR and a rewards program.

Look for benefits that match your needs — airline miles if you travel often for business, or cash back if extra funds would be more useful.

3. SBA Loans for Startups

The SBA doesn’t give out loans directly, but it does partner with lending companies that agree to abide by the SBA’s guidelines. Because these guidelines are designed to reduce the risks for lenders, it becomes easier for individuals to qualify for and get a startup loan.

In addition to competitive loan rates and lower down payment requirements, the SBA provides counseling and educational information that could help your business succeed.

You’ll need 10% to 30% equity to qualify for these loans. Keep in mind that alternative sources like gifts, retirement account distributions and home equity loans can help you meet those requirements.

4. Personal Loans for Business Use

Personal loans can be an option if you have a credit score of 580 or higher. You’ll receive your funds in as little as 24 hours and be able to use the money in almost any way you see fit.

The downside is that a personal loan makes it more difficult to keep business finances separate from personal finances.

5. Crowdfunding

Equity crowdfunding is specifically designed to aid startups or businesses that are in the early stages of their development.

You set the terms, and if the investors look through your portfolio and like what they see, you can reach an agreement.

With this method, investors take on more risk, as they will not be able to recoup their investment if your business fails.

6. Grants

Grants don’t have to be paid back, so they’re not loans, but they can help you fund your business.

Of course, some grants come with stipulations that business owners must agree to follow.

• The grant could be designed to provide technology to get your business organized.
• It might also specify that the funds are for stocking the shelves of your store.
• The SBA does not offer grants for business startups, but some state and local governments and other organizations do.

Consider This

Small businesses dominate the U.S. economy, with nearly 34.8 million making up 99.9% of all businesses, according to the SBA.

However, not every small business starts the same way.

Carefully weighing your funding options — from loans to grants — can make a big difference in your startup’s financial stability and long-term success.

Should You Get a Business Loan With No Money?

Borrowing money for a business that isn’t making money is risky. Here are some key considerations:

• Loan payments may be unsustainable if your business lacks the income to cover them.
• You may need to risk your personal assets, which could put your overall financial health in jeopardy.
• Alternative funding sources like grants, crowdfunding and partnerships might be safer options for startups without revenue.
• An exception could be if you have a well-researched business idea with strong market demand and a detailed business plan.
  • In this case, you might explore riskier options like a home equity loan or retirement account withdrawal — but only if you’re comfortable with the potential risks.

Alternatives to Startup Loans When You Have No Money

Starting a business without cash or credit may sound impossible, but many entrepreneurs have launched with creative, low-cost strategies that don’t involve traditional loans. If you’re short on funds and banks aren’t an option, here are some alternatives to explore:

• Start small and self-fund with revenue. Begin with a minimal version of your product or service and reinvest early profits. This “bootstrapping” approach helps you stay lean, prove demand, and avoid debt. Many service-based businesses–like consulting, tutoring, or freelancing–can be started with almost no overhead.
• Use crowdfunding platforms. Sites like Kickstarter and Indiegogo let you pitch your idea directly to the public. If people like your concept, they can pre-order your product or contribute in exchange for rewards. It’s a way to raise funds while building a customer base at the same time.
• Tap into community resources. Look for free or low-cost support through local small business development centers (SBDCs), nonprofit incubators, or co-working spaces. Some cities even offer grants or microloans for minority-owned or underserved startups.
• Partner or barter. Find a co-founder who brings skills or capital to the table. Or consider bartering services–like offering free marketing in exchange for web design. Strategic partnerships can get you up and running without needing cash up front.
• Consider grants or pitch competitions. Unlike loans, grants don’t have to be repaid. Many organizations and government programs offer small business grants, especially for veterans, women, or minority entrepreneurs. Business pitch competitions are another opportunity to win startup funding and gain visibility.
• Sell personal items or side hustle. While not glamorous, selling unused items or taking on a temporary side hustle can provide the seed money you need to launch. Even a few hundred dollars can cover essential startup tools or legal fees.

Final Thoughts

It’s difficult, but not impossible, to get a business loan when you have no money. Alternative forms of equity can help you qualify. Microloans, grants and other specialized programs provide additional opportunities to raise funds.

But be sure to have your ducks in a row before you look for funding. A detailed business plan explaining how you intend to start and grow your business will help you get your business off to a strong start and assure lenders that your business is worth their investment.

Alicia Bodine contributed to the reporting for this article.

Share This Article: