Financing your business before you have anything to show for it can be challenging. Lenders typically look for borrowers with steady sales or those who can demonstrate a path toward earning a profit. Yet small-business owners have borrowing options even without any money, revenue, or established business credit.

The ways to get a startup business loan with no money include traditional financing and microloans. Other options to fund your business include grants, crowdfunding, and various types of investors. Learn more about how to secure a business loan, even if you lack sales history or have minimal working capital to back your business. Plus, you’ll learn about alternative funding options. 

What is a startup business loan?

A startup business loan is a loan for new businesses that don’t have an established track record. Business owners borrow funds in a lump sum for business purposes and then make payments on the principal, along with interest, until the business loan is paid off.

Many traditional business lenders require proof of income—whether through tax returns, audited financial reports, or bank statements—to prove small businesses can repay those funds. Because many new businesses don’t have this information, they turn to other funding options, like a startup business loan. 

If you don’t have an established proof of income, banks and lenders can look at other factors, including your personal credit score and business plan, to ensure you have a demonstrated ability to repay the loan. That said, if you are offered a loan for your business without proof of income, you may face a few challenges. You may end up paying a higher interest rate, receiving less funding, or being denied approval altogether.

How to apply for a startup business loan with no money

1. Assess your options
2. Review your credit score
3. Check your eligibility
4. Offer collateral
5. Add a cosigner
6. Develop a business plan

Even without any income or business credit, you might qualify for a small-business loan. The US Small Business Administration (SBA) guarantees loans from SBA-approved banks, letting them offer lower interest rates and more favorable terms. The agency itself doesn’t fund startup loans, so your eligibility is generally determined by the lender. Here’s how the process works:

1. Assess your options

There are a few options to get a startup business loan with no money. The SBA offers microloans up to $50,000 to small businesses to start or expand. You can use a microloan to cover a range of different expenses and needs, including working capital, supplies, and inventory to start selling your products or offering your services. 

There are also SBA Express loans, which fund startups that show a need for financing. In most cases, you can get funding within 20 days of applying. Borrowing amounts are capped at $500,000, while other SBA loans like the SBA 7(a) loan allows you to borrow up to $5 million.

Both microloans and Express loans are backed by the SBA but administered through individual financial institutions. This means each lender has their own eligibility standards for qualifying. Some lenders require proof of cash flow, while others may not have minimum revenue requirements. All lenders require proof of your ability to repay the loan.

Alternatively, Community Development Financial Institutions (CDFIs) are lending institutions focused on communities, groups, and individuals who might not be eligible for loans due to a lack of credit history or collateral. They are certified by the US Department of the Treasury and match federal dollars with private sector capital.

2. Review your credit score

If you don’t have any business credit yet, lenders may look at your personal credit score to see if you can make payments on a small-business loan.

Credit score requirements vary by lender, but traditional lenders look for borrowers with credit scores of 680 or higher (the maximum usually is 850). Alternative lenders may have lower credit score requirements in the 500 to 600 range. Although these more lenient requirements might help you qualify for a small-business loan, you may end up with a higher interest rate.

3. Check your eligibility

Although each lender has its own unique eligibility requirements, there are some universal standards your small business should meet. Requirements include:

• Registering as a for-profit business operating in the US

• Being responsible with credit according to lender standards

• Proving you can pay back your loan

Not all lenders offer SBA loans. Before going through the application process, make sure you understand the small-business loan you’re applying for and if you can qualify. Some banks only offer loans to companies in certain geographic areas.

SBA loans require that individuals who own 20% or more of the business must sign an unlimited personal guarantee. This means that if your business cannot repay the loan, you are responsible for repaying it in its entirety from your personal assets.

4. Offer collateral

Although unsecured business loans lean more heavily on your credit score and credit history, bad credit could hold you back from getting approved or limit your loan amount. When this is a limitation, some founders explore secured business financing by offering collateral. The type of collateral depends on the lender and the type of loan you’re seeking. You could put up various business assets, like equipment, inventory, or a work vehicle. Remember that if you fail to repay the loan, the lender may seize your collateral.

5. Add a cosigner

If you have bad credit or don’t think you can qualify based on your credit history, you may also consider asking a trusted party to be a loan cosigner for support. Cosigners should have excellent credit and understand they are as responsible for your debt repayment as you are. If you and your business are unable to make payments, the obligation falls on your cosigner. Falling behind on payments could cause you to default on your loan, which stays on your credit report—and your cosigner’s—for up to seven years. 

6. Develop a business plan

A strong business plan shows banks and lenders that you have a solid proposal for how you will use the investment capital and repay the borrowed funds. Your business plan should include information about your business, products or services, and goals. 

On an episode of the Shopify Masters podcast, Vicky Pasche, cofounder of body-inclusive apparel brand Dapper Boi, urges founders to figure out what kind of financing they need. They advise entrepreneurs to plan out how that funding will cover essential costs and business growth. Before borrowing, it’s essential to nail down your goals, what services you plan to offer, and how you will use the capital to develop your business.

Alternatives to startup loans

• Bootstrapping
• Angel investors
• Crowdfunding
• Grants

Although startup business loans are one way to get capital, you may want to consider other options before completing the loan application process. These include:

Bootstrapping

You can bootstrap your business, which means using your personal resources to fund it. Using your own cash, like money from a personal savings account, lets you cover your expenses without taking out a business loan. This saves you from paying potentially high interest rates and fees, not to mention the obligation to repay the loan.

During the startup phase of Dapper Boi, Vicky says she and her cofounder used their own cash before turning to other resources. 

“We didn’t have any money at the time, and so we were looking at different ways to bootstrap the brand,” she says. 

It’s not uncommon for founders to use their own funds to buy equipment or pay employees until they have steady sales and a stable footing in their market.

Angel investors

Angel investors typically invest their own funds in a startup, usually in exchange for an ownership share or equity. These types of investors are usually executives or founders of their own companies who also serve as mentors for startup founders on the hunt for assistance with business financing. They usually offer investment in exchange for partial ownership of the company.

Crowdfunding

Although angel investing can give your business a hefty chunk of change in exchange for an ownership stake, crowdfunding gives many people a chance to support your business. In exchange for receiving financial backing, business owners can offer their backers limited-edition product drops or a first chance to buy new products. 

GoFundMe, Kickstarter, and other crowdfunding platforms give you plenty of options. After bootstrapping Dapper Boi in the very early stages, Vicky turned to crowdfunding for the next round of capital for her business. 

“I feel like Kickstarter was just a great place to start,” she says. “We had heard about it and seen other companies successfully launch there. It was an awesome place to find folks that needed what we were offering.”

Grants

Federal, state, and local grants for startups and other small businesses offer financial resources with no expectations of repayment or equity in the company. The SBA offers small-business grants, but you might find even more at the state and local levels.

*Shopify Capital loans must be paid in full within a maximum of 18 months, and two minimum payments apply within the first two six-month periods. The actual duration may be less than 18 months based on sales.