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How to Get a Business Loan with No Money in the Bank

Forest Sisk

Loan Specialst at Fundera
Forest is on the customer success team at Fundera. As a Loan Specialist, he works directly with small business owners throughout the loan process, helping them find the best financing for their companies.
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There are so many driving factors behind the search for a small business loan, but the most common of them all is to get access to cash so you can nurture your business. If you’re low on cash, it makes a lot of sense that you’d want to apply for financing. So, you’re probably wondering how to get a business loan with no money—if that’s even a possibility.  

Across industries, a common thread among businesses is the need for capital. Sure, a freelance consultant’s needs are going to be different than a restaurateur’s, but many of them are rooted in money. The catch-22 of it all lies in the fact that it can sometimes require existing money to qualify for a business loan to get more money.

You might have disposable funds that you just don’t want to tap into to apply for a business loan. Other times, you just might not have the cash flow a lender is looking for to be approved for a business loan. Whatever the scenario, we’ll take a closer look at how to get a business loan with no money in the bank.

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Common Reasons You Might Need to Get a Business Loan with No Money

Before we get into exactly how to finance a business with no money, let’s take a step back: What are some common causes for a low-to-zero balance in your business bank account? Figuring out the why will help you know what exactly to do next:

1. You’re waiting to get paid.

Many businesses work on contracts: construction, trucking, consulting. Almost all B2B companies, actually. As a result, sometimes you need to wait for your services rendered to render you payment.

In some cases, these waiting periods can last months. But you don’t have the luxury of being able to sit around before you start your next job, contract, or project—as they say, time is money. So, you start that next project because, quite simply, you have to.

And as you wait to get paid, you’re still incurring expenses. That’s when the funds in your account begin to shrink instead of grow.

2. Your business is struggling to scale due to resources.

When you first opened up shop, you probably used startup-sized resources to get your business off the ground. But that small pool of resources you started out with can’t keep up with your growing business.

The truth is, bigger businesses need bigger amounts of capital to thrive. One of a small business loan’s many uses is to provide that additional capital boost. With your loan, you can replenish inventory to meet your customers’ growing demands, hire more employees, even open up a second location—whatever it takes to keep up with your own growth. But if you’ve wiped your original reserves clean, you’ll have a hard time securing that business loan at all.

So, when drawing up your business plan, it’s important to factor in the inevitability of scaling. You work hard to get your business to where it is today, so you want to make sure that when you kick things into growth mode, a lack of funds doesn’t bring you to a screeching halt.

3. You’ve mixed personal and business finances.

For a whole host of reasons, financial advisors recommend not mixing personal and business finances. But this is a tricky issue, and everyone handles it differently. Depending on your lifestyle, industry, and countless other factors, it can be hard to know how much of the money you earn should stay within your business, and how much should go to paying down your mortgage.

After all, you founded your business on the belief that this is your livelihood: It might have been your dream, but now it’s very much a reality. Even if your personal and business cash flows are indeed separate, it can be tough to view them as such.

Here, too, it’s important to plan exactly where funds will be heading on both a personal and business level. It can be all too easy to pull too much from your business bank account to pay for that mortgage, or any other countless personal expenses you encounter on a daily basis.

A healthy business bank account should never dip below zero, resulting in the dreaded “NSF.” In order to avoid this, leave an extra couple thousand dollars sitting in your business checking account. At the very least, this is a rainy day fund. In its truest form, that cash cushion can mean the difference between success and failure, especially because it’ll enable you to apply for small business financing when the need arises.

→TL;DR (Too Long; Didn’t Read): There are lots of reasons why you might be suffering from cash flow problems. Part of finding the right financing without a high bank balance is understanding why you aren’t flush with reserves.  

Why Lenders Are Looking at Cash Flow When You Apply for Small Business Loans

If you’ve applied for a business loan before, or at least looked into it, you likely know that small business lenders don’t often consider candidates who don’t have a cushy bank account balance to back up their applications. But if you need to get a business loan with no money, you should understand why lenders care about cash flow in the first place.  

At the most basic level, cash flow indicates the health of your business. Positive cash flow means there’s more money heading in your direction, and a negative cash flow often means a business is struggling.

Of course, you care most about your cash flow in terms of how it’ll affect your day-to-day operations. But as soon as you land in the small business financing market, your solvency is important to lenders, as well. How do lenders determine whether they feel comfortable extending you a loan? In large part, by investigating your cash flow.

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How Lenders See Cash Flow and Assess Risk

As mysterious as they may seem, lenders are actually pretty easy to understand, especially when you’re considering their business loan requirements. One of their most crucial requirements is cash flow.

Some lenders require a certain amount of funds in a potential borrower’s business bank account before even considering extending a loan. Other lenders are a little more forgiving of cash flow, as long as other requirements, like personal creditworthiness, are strong.

Every time a lender extends a loan, they’re taking a big risk. They need to know that a borrower is able to manage additional debt, and has the financial capacity to repay that debt in full.

So, the terms of a loan are always a reflection of that risk. If lenders deem a business risky, they’ll hike up the interest rate, increase payment frequency, and shorten the repayment period. If they view a business as low risk, the opposite will occur.

Low bank balances are a big contributing factor toward a riskier business assessment. A major reason for this is that loans operate on automatic withdrawals. If your loan requires you to make weekly payments of $400 but you never have more than $1,000 in your account, chances are you won’t be able to consistently pay your loan bills in full and on time. Needless to say, this isn’t a good situation for you or the lender.

Overall, it makes sense that lenders construe positive cash flow—or sufficient money in the bank—as an indication of a business’s reliability. And that’s why, on the flip side, it can be tough to get a business loan with no money in the bank.

→TL;DR: Lenders are concerned with cash flow because they want to make sure they can get their loaned money back. Lower bank balances often reflect higher risk.

Your Top 3 Options for Financing a Business with No Money

As you can imagine, it’s tough to get a small business loan with no money. And while it’s unlikely that you’ll be able to secure a traditional term loan or SBA loan with limited funds, you still do have financing solutions available to you.

You might have an easier time qualifying for the following financing solutions. And, if you do, these alternative loans can help boost your business’s cash flow, so you can be in a position to graduate to a small business loan that yields even larger amounts of cash.   

Business Credit Cards

Your business’s biggest expenses, like payroll and rent, will require loan-sized funds to satisfy. But you can absolutely meet the countless other expenses you face daily with a business credit card. Plus, using a credit card responsibly (which, in large part, means paying your credit card bills in full and on time every month) will boost your credit score. Other than cash flow, your personal creditworthiness is a crucial factor in the business loan application.

There are countless business credit cards on the market today, and they all come with perks, rewards, and features that match the reason you’re looking for funds in the first place.

As we said before (and as you’ve definitely heard before that), it takes money to make money. Using a cash back business credit card is case in point: Spending in certain categories earns you hard cash, which you can then reinvest back into your business.

In particular, the Chase Ink Business Cash credit card offers one of the most generous cash-back rewards programs on the market.

Right off the bat, you’ll get $500 cash if you spend $3,000+ within the first three months of owning your card. Then, you’ll receive 5%, 2%, or 1% cash back, depending on which categories you spend in (like cell phone, internet, and cable services, or office supply stores).

The Chase Ink Business Cash Credit Card also carries no annual fee, which helps you save even more.

Even if you’re in a position in which you need to build credit, you still have options for cash back cards. The Capital One Spark Classic for Business will let you not only earn 1% flat cash back on all purchases with no annual fee, but you’ll build your credit, too. Just make sure you pay your bills in full and on time, of course.

The minimum approval for this credit card is a 550 credit score, so many business owners have options for business credit cards, no matter where they stand.

→TL;DR: Business credit cards are a good place to start, and there are options for business owners with many different credit profiles.

Equipment Financing

The underwriting process for an equipment loan is a little different than that of a traditional term loan. The lender fronts you the cash to fund up to 100% of a piece of equipment, and they use the equipment itself as collateral.

For that reason, lenders are just as concerned with the value of the equipment itself as they are with your business’s financial record. The terms of an equipment loan are based off of credit (both business and personal), time in business, and how well the equipment fits into your business plan. Cash flow isn’t a major factor in that decision.  

If you’re looking for a new machine, computer, or vehicle to boost revenue, it makes a lot of sense to look into an equipment loan.

→TL;DR: Since the financed equipment provides collateral in an equipment loan, this kind of business financing is easier to secure.

Invoice Financing

Invoice financing ties back to a situation we discussed earlier: When you’re waiting to get paid for completed work, that money is as good as guaranteed. And there are lenders who can analyze those unpaid invoices and extend you the funds ahead of time, so you don’t need to wait idly by until you get paid.

Like equipment loans, invoice financing is a type of collateralized loan. In this case, invoice finance companies use your business’s unpaid invoices as collateral and, in exchange, they’ll front you the missing cash.

Also like an equipment loan, invoice financing companies are just as concerned with the value of your invoices as they are with your business’s finances. So, not only will you receive your invoice payments quickly, but businesses with limited cash flow might have an easier time qualifying for this type of loan than others.

→TL;DR: Businesses with limited cash flow might have an easier time qualifying for invoice financing, since these lenders focus on your accounts receivable.

The Best Solution to Get a Business Loan with No Money

If you’re looking into how to get a business loan with no money, it’s definitely worthwhile to look into the above financing solutions. But, in reality, the best course of action is a little less exciting. If you can wait, wait!

You’ll have the best luck getting a business loan with favorable terms when your business’s financials are in order. In the meantime, focus on saving.

Ask yourself: What costs can I cut without fundamentally undoing what I do best? You may be surprised by how much your business can save by making a few operational changes. Also, create specific a savings goal, and adjust your budget accordingly. And open up a separate business checking account that you automatically transfer funds into intermittently.

Once you build up your business’s cash cushion, both the lending world and your own world will become so much easier to manage.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Forest Sisk

Loan Specialst at Fundera
Forest is on the customer success team at Fundera. As a Loan Specialist, he works directly with small business owners throughout the loan process, helping them find the best financing for their companies.

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