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How to Get a Startup Business Loan with No Money

lendstart
Lendstart Updated: July 2, 2023 • 7 min read
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Securing a business loan may be tougher for startups than for established businesses, but it's still possible. To increase your chances of getting funding, you'll have to ensure you have a solid business plan, a good credit score and research all of the options available. These are just a few things to consider regarding startup loans, and we'll cover many more in this article.

The 5 Steps You Need to Follow to Get a Business Loan with No Money

If you hope to get a business loan with no money, there are five vital steps you need to take:

1. Research your options

When it comes to getting a business loan for your startup, it's important to compare loan options from different providers. Typically, online lenders will be more likely to lend money to new businesses compared to traditional institutions like banks. When doing the research, be sure to consider not only interest rates, terms and loan amounts, but also how quickly you can get the funds, extra costs and fees and more. You can prequalify to assess your eligibility and get a sense of how much you might be able to borrow. 

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2. Create a detailed business plan

Application for a business loan requires comprehensive information about your company, plans for the future, and ability to repay the loan. This is why you need an up-to-date business plan detailing how you plan to profit from your venture. Lenders will want to know that there is a market for your business and that your business is different from the competition. (Read more here: How to Start Your Own Business – Step-by-Step).

3. Build a strong credit profile

Your credit profile is one of the vital factors lenders carefully consider when lending money. So before you apply for a startup loan, you'll want your credit report to be free from past-due payments, debts, or other negative marks. While some lenders will work with business owners with scores in the low 600s and under, it's a good idea to improve your credit score fast prior to trying to secure funding.

4. Gather necessary documents

Another consideration is the variety of documents you need on hand when applying for a startup loan. For example, you'll need proof of your revenue and expenses, personal financial statements, tax returns, and other documents which we'll outline later in this article. 

5. Complete the application

Once you have collected the necessary documents, such as a business plan, credit profile, and collateral base, apply for the business loan with the lender of your choice. After that, wait for the lender's decision. This will take anywhere from a few days to several weeks.

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What Other Options are Available to Get a Loan with No Money?

Let's say you don't qualify for a traditional business loan. Maybe the terms and conditions simply don't fit your needs, and you're left wondering about your options. In such cases, there is still hope. Here are five other options to consider.

Angel investors

These are high-net-worth individuals who can provide capital for your startup. Sometimes, they even offer business advice and other beneficial resources. Contact the local angel investors' network in your area and see if you can find relevant contacts to connect with. If your business idea is attractive enough, you may be able to get the startup money you need with this route.

Venture capitalists

Venture capitalists are professional investors. They provide capital for growing businesses in return for equity and ownership in your startup. To get in touch with venture capitalists, you should create a detailed business plan and present it to them. You must also prepare to answer industry and company questions they could throw at you.

Crowdfunding campaigns

Crowdfunding campaigns are an innovative way of raising funds from the public that have become incredibly popular in recent years. With this option, you'll create an online campaign for your startup. Typically, you'll need to offer the crowd some type of incentive for their investment, such as equity in your business, or different tiers of rewards based on their investment amount. You'll need to spend time and resources in promoting your campaign to up its visibility. 

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Grants

Grants are an appealing option for getting a loan with no money for many startup owners. With a grant, often available from the government or non-profit organizations, you don't need to pay the money back. This makes the competition for grants extremely high, so much so, that organizations employ full-time grant writers to complete their applications. Planning to go this route? Then prepare your application carefully and use all available resources to increase your chances of success. (Read more: Grant and Loan Resources from the Government). 

Personal loans

In some cases, a personal loan to start a business may be a suitable option. Personal loans are unsecured loans with a fixed interest rate, which can be used for a variety of purposes. They typically have lower interest rates than business credit cards, making them a popular option for business funding. Keep in mind that these types of loans may come with high interest rates, so the longer your loan term, the more interest you'll be paying over the lifetime of the loan. 

For even more options, read this post next: Alternative Ways to Secure Funding for Your Business.

What Documents Do You Need When Applying for a Business Loan Without Any Money?

When you apply for a loan for your startup, you'll need documents that prove that your business is viable and has the potential to bring in revenue. 

Generally speaking, these include a business plan, personal financial statements, tax returns, and other proof of revenue and expenses. However, remember that the required documents may differ depending on the loan type you are applying for and your current situation.

Here is a checklist you can refer to when you're gathering the documents for your application for a business loan to start a business:

  • Proof of identity: Passport/driver's license, etc.
  • Business plan: This should outline your business model, the market you plan to operate in, financial projections and more.
  • Financial statements: These include your balance sheet, income statement, and cash flow statement to provide an overview of your business' health. 
  • Tax returns: Typically, lenders require several years of personal and business tax returns to assess your financial history and stability.
  • Bank statements: Recent bank statements are necessary to demonstrate your business's cash flow and financial activity.
  • Evidence of collateral or security deposits: If you are offering collateral to secure the loan, such as property or equipment, you will need to provide documentation of the value of the assets.
  • Resume/CV and any other supporting documents: Showcase your qualifications and experience, including those of any co-business owners. 

Learn more about getting a business loan here: Do I Qualify for a Business Loan? 6 Questions to Ask

 

Writing an Impressive Business Plan Can Help Secure Your Loan

Writing an impressive business plan is critical to securing a business loan, because it demonstrates to lenders that you have a clear vision, solid strategies, and a comprehensive understanding of your business. This builds lenders' confidence in your ability to repay the loan. 

How to Write a Business Plan

So, how do you write a startup business plan to impress your lender?

To start, plan out the structure and content of your business plan. Remember to include all the relevant information about your startup, such as:

  • Executive summary: Describe your background, your business and highlight the goals of the company and how you plan to achieve them. Don't forget to include the structure of the company, for example, is it an LLC or a DBA? 
  • Market analysis: Break down your company's position in the market in comparison to your competitors. This should include the size of your target audience, the environment of the industry you plan to operate in, opportunities and threats to your business, and more. 
  • Product or service information: Portray your products or services, how they fare against the competition, the costs and how you plan to source any materials. 
  • Financial projections: Include budgets for key projects, financial statements, a balance sheet and cash flow information. If you've never put together anything of the sort, consider consulting with an accountant or financial professional in your life who can help. 

The content of your business plan is the most important thing. Try to focus on telling a compelling story about your company's possible success and growth.

Finally, double-check for typos or errors before submitting it to the lender. Again, attention to detail is critical here and can help give your business plan an edge over the competition.

Conclusion: How to Get a Loan to Start a Business

Getting a loan with no money to start a business is possible. While the process may be intimidating, you now know more about how to get a startup business loan with no money, empowering you to take the next step. 

Think about which loan route you want to go with, be it a crowdfunding campaign, grant, personal loan, or the other options we've covered. Then, do your research, get familiar with the required documents, and prepare a business plan to capture the attention of potential lenders. 

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