Starting a business can sometimes make you feel like pulling out your hair. Most businesses require significant capital to start off properly, and unless you have investors backing you, your next option is to get a business loan.
Small business owners may find it hard to get a loan, but thankfully, we’ve highlighted several options available that can help secure a loan with no money.
How Can I Get a Loan For My Business I Just Started?
If you’re looking for a loan for your new business, you need to follow these three steps.
- Create a business plan
You need a business plan because lenders want to know what your business is about. It’ll show them how the company will grow, what you need to kick start it, the expenses and sales that’ll come in, and even what you expect from the business in the next five to ten years. Also, since your business is new and has no track record, a business plan will help lenders assess the risk.
- Do your research
You should be aware of the industry’s trends and challenges. However, doing your research also demonstrates to lenders that you are dedicated and willing to work hard to see your business succeed.
- Invest in it as well
Investing your own money in the business will make it easier to get a loan. It’ll reassure lenders that you’re also willing to risk your money and not just theirs.
Personal guarantees are frequently required for loans that are not secured by assets. This means that your personal credit score will play a significant role in whether or not you are approved for a loan.
Why Is It So Hard to Get a Start Up Business Loan?
There are several reasons why lenders reject your business loan application. Here are a few:
Your personal credit score is low
Lenders will often review your personal credit to try and get an idea of how well you’ll handle the business. According to a survey conducted by Goldman Sachs, at least 70% of small business owners say their personal credit score played a key role when they applied for a business loan.
If your credit score looks bad, it can disqualify you from getting certain business loans. You may be able to get a bad credit or no credit check business loan, but those usually have high fees and interest rates.
Multiple loan applications
While it may appear that applying with multiple lenders will increase your chances of getting a loan, the opposite is more likely to occur as lenders will consider this as a red flag. In addition, multiple loan requests on your credit score tell lenders that you are inexperienced or desperate.
Ask your lender to use a “soft credit pull” to ensure your credit record isn’t harmed.
Poorly written business plan
Some lenders will look at your business plan to evaluate the risk of offering you a loan. If you have a solid business plan, you may not need to put up collateral. However, if your business plan looks like you didn’t put any thought into it, your application will be declined.
When creating a business plan, take your time to explain the market you’re entering, including things like demand and how your product can satisfy that demand, and give a summary of your product.
Missing information/documents
The process of applying for a business loan can be time-consuming. When you factor in the mountains of paperwork that certain lenders demand, it’s no wonder many business owners feel so frustrated.
But there’s a reason these institutions ask for the information as it helps them determine if loaning you money is a good investment. So make sure you critically go through your loan application, double-check the details, and produce every document and information they ask for.
Can You Get a Loan to Start a Business With No Money?
New firms that want to get off the ground and expand their operations will undoubtedly look for funding to help them do so. If you cannot secure funds for your startup, you will most likely need to rely on a loan.
Even if you don’t have any money, you can always rely on a business loan as a viable alternative. This will save you from using your savings to get your business off the ground. However, you should only borrow money when you’re sure you’ll be able to repay it in time.
Try these options if you need a loan to start a business with no money.
- Business credit cards
Business credit cards allow you to borrow up to a set credit limit like personal credit cards. However, you’ll be required to pay the balance at the end of each month, and if there are any unpaid balances, they’ll continue to accrue interest until the credit line is paid in full. So if you pay your balance entirely at the end of every month, you won’t have to pay interest.
- Crowdfunding
Crowdfunding has become a popular method of financing a business, even though it is a less traditional means to raise money. It works like this: You write a post detailing your product or service on crowdfunding platforms like Kickstarter or Wefunder. Then you set a target amount and wait for contributions.
- Equipment financing
Equipment financing allows you to finance the acquisition of equipment required to run the business. This might range from little gadgets to massive manufacturing gear. You can use the equipment as collateral to secure a loan.
Is It OK to Get a Loan to Start a Business?
Like everything else in life, there are pros and cons to this. If you’re unable to secure funds to start up the business, you may have no choice but to get a loan. However, if you plan to take a loan, make sure you have a solid business plan, otherwise, you’ll struggle to pay back the loan, which can lead to debt.
If you believe you can finance the business yourself without a loan, then it’s perfectly okay to finance it without taking a loan. Need a loan? Then check out Capital Pacific Bank’s payday loans. With an easy-to-follow application process, you’ll receive a loan in no time.
