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How to Startup Business Loans with No Revenue: A Beginner’s Guide
Entrepreneurship is an exciting experience that comes with a lot of excitement and one of the greatest problems that may face an entrepreneur is financing. Small business owners find it hard to secure loans particularly where they have no income to present. In this case, there is no need to panic because there are a few methods of getting a startup business loan without revenue.
Here, we are going to discuss the ones you have, what you should do, and the probability to get funding to your new business. You are a first-time entrepreneur or a long time business owner, the most important thing is to know the resources that are available and make your dream a reality. Continue to find out how to secure startup business loans without revenue.
Why Traditional Loans Are Hard to Get Without Revenue
In the case of a standard loan like the one taken in a bank, the lenders will normally demand evidence of revenue. The reason behind this is that they would want to know that your business is capable of earning money and repaying the loan. You may find yourself risking your startup since lenders might think that you have no revenue. But that does not mean you are not in luck.
The positive is that there are numerous alternative financing sources that serve startups that have no income. These alternatives tend to be more versatile and readily available as compared to the traditional loans and you are able to get the financing you require to start and expand your business.
Types of Startup Business Loans with No Revenue
1. SBA Microloans
Small Business Administration (SBA) provides microloaning of startups, and this is the best option in case your business is new. Highly likely the loans are small in amounts between $500 and 50,000 and can be spent in different ways such as working capital and inventory.
• Benefits:
- Lower interest rates
- Less strict qualification requirements.
- Flexible terms
• Eligibility: You will require a good personal credit and a good business plan.
2. Business Credit Cards
Bizcards or business credit cards are an alternative in case your startup does not earn any revenue. A lot of credit cards are offering 0 APR during the initial few months meaning that you can use the credit card to make the purchases and pay without interest.
• Benefits:
- Quick access to funds
- Revolving credit line
- Reward points and perks
Challenges: When the introductory rate expires, high-interest rates.
3. Crowdfunding
Crowdfunding sites such as Kickstarter and Indiegogo enable you to raise funds by soliciting the help of a large number of individuals in small amounts. This is a very ideal strategy when you possess a product/ business idea that is compelling.
• Benefits:
- No repayment or interest
- Helps establish a tribe of followers.
• Challenges: Needs a powerful marketing strategy and an effective pitch to get supporters.
4. Online Lenders
Online lenders such as Kabbage and OnDeck have fast access to capital to startups, even without meaningful revenue. These lenders are usually short term lending or a line of credit which is quicker to be approved.
• Benefits:
- Quick application and acceptance.
- More flexible terms
• Difficulties: The interest rates are higher compared to the traditional banks.
How to Qualify for a Startup Business Loans with No Revenue
Though it may be hard to attract a loan with no revenue, there is the means of enhancing the chances of loan approval. Some of these factors will look at the lenders in terms of revenue, and they include:
1. Strong Business Plan
It is also necessary to have a well-considered business plan in order to obtain a loan. This plan must define your business objectives, market and your projected revenue. You might not have any revenue but the lenders would be interested in knowing that you have a plan on how to generate revenue.
• Tip: Assemble your attention on how you are going to capture customers and make sales. Be honest with your estimates and emphasize on your experience in the practice.
2. Personal Credit Score
The credit score of your personal details is an important matter in applying loans without revenue. Although your business may not be generating revenues, lenders will base their judgment on your credit score to determine your repayment capacity of the loan.
• Tip: Take care of your personal credit score, making sure that you pay all debts and you do not skip payments.
3. Collateral
Using collateral may also increase your loan chances by a wide margin. Some of the assets that may be classified as collateral are equipment, inventory, and property. Failure to repay the loan will mean that the lender can claim the collateral.
• Tip: Make sure you do not pledge anything that can subject your personal or business assets to the risk.
Non-Traditional Lenders and Alternative Funding Options
If you’re unable to secure a traditional loan, consider turning to non-traditional lenders or alternative funding sources.
1. Angel Investors
Angel investors are those who inject funds in an enterprise in an effort to be given equity. These investors may tend to be more tolerant to risks as compared to the traditional lenders since they are seeking high returns.
• Benefits:
- Large funding amounts
- Connection with knowledge and experience.
Challenges: You will have to relinquish some of your business as a trade-off towards the investment.
2. Venture Capitalists
VCs are companies that finance high growth opportunities startups. Similar to angel investors, they demand equity as a reward to their investment.
• Benefits:
- Availability of huge amounts of capital.
- Mentoring and business counseling.
• Difficulties: VCs are usually more choosy because they make investment in businesses that are likely to grow fast.
3. Peer-to-Peer Lending
The P2P (peer-to-peer) lending sites match borrowers with investors. Such platforms usually offer liberal lending requirements than the conventional banks and can be a valid alternative to startups.
• Benefits:
- Reduced interest rates compared to the conventional lenders.
- Reduced qualification standards.
Challenges: It can be a competitive process yet it is an application process.
Tips for Increasing Your Chances of Getting a Loan
In order to have a higher probability of a startup business loan with no revenue, you should take into account the following tips:
1. Build a Solid Business Plan
A comprehensive business plan, which includes your business plan, market research, and estimated income, can be a long way to making the lenders believe that you are serious about your start-up. Emphasize on showing how you will make money, although it has not yet occurred.
2. Keep Your Personal Credit Under Control
One of the most important things that the lenders will consider is your personal credit score. Good credit will indicate to the lenders that you are financially responsible which will likely lead to your approval.
3. Search for a variety of sources of funds
The traditional loaning may not suit you, so turn to such alternative sources of money as crowdfunding, angel investors, or online lenders. Be receptive to various sources of funds to have the best chance of succeeding in business.
Conclusion: Startup Business Loans with No Revenue
Any Startup Business Loans with No Revenue, in which there is no income, can be obtained but it will have to be researched, planned, and a tactical approach should be taken. Between SBA micro loans and other sources of funding angels, there are various options to fund your startup. When you concentrate on your business plan, credit score and collateral, you are likely to have a high chance of securing the funding that is necessary to start and expand your business. Act now, and begin to find a way to take a loan, even without revenue.
FAQs Startup Business Loans with No Revenue
Is it possible to have a Startup Business Loans with No Revenue?
Yes, it has a number of options, such as SBA microloans, business credit cards, and crowdfunding. There are also numerous other lenders who provide loans to startups that do not have substantial revenues.
What do I do to ensure that I have a better chance of securing a loan without funds?
A good personal credit report, a good business plan and collateral can also aid you in your efforts to take out a loan.
What are the other options of funding startups that do not have any income?
The other sources of funding can be the use of angel investors, venture capital, crowdfunding, and peer-to-peer lending. These alternatives could provide a greater level of flexibility when compared to conventional loans.
What is the most suitable loan to start business with no income?
Good ones are SBA micro loans, business credit cards and online loans. The amount of capital you require and the terms that you are able to fulfill will be your decision.
What is the significance of my personal credit score in obtaining a loan?
Personal credit score is quite significant. It assists the lenders to understand whether you can repay the loan particularly when your business is not generating revenue.