How to Get a Startup Business Loan with No Money

“How do you start a small business with no money?” This is a common question. However, it’s also a tricky question. You need money to start a business, and you have to get it from somewhere.

If you really want to start your dream business, but don’t have the funds right now, there are at least 7 clear and simple options you can use. Check it out.

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1. Borrow from Yourself

Most people have a retirement, like a 401(k) they can borrow from. You can borrow up to 50% of your account balance, with a maximum of $50,000. This option is actually better than it sounds because you’re borrowing from yourself, and you won’t face penalties.

2. Use Home Equity Loans

If you own a home, a home equity loan or a home equity line of credit (HELOC) might be an option. This allows you to borrow against the equity you’ve built in your home. While this can provide a larger sum of money, you will pay interest to the bank, and the rates may be higher than other options. So just be careful when you compare your options.

3. Use Friends and Family Funding (FFF)

Consider borrowing money from family members or friends who believe in your business idea. If you choose to go this route, make sure to keep things clear and professional. To do this, it’s wise to draft a formal agreement outlining terms, especially repayment terms. Consulting with a business attorney can help you be sure that the agreement protects both you and the friends or family that are loaning to you.

4. Look into SBA Loans

The Small Business Administration (SBA) offers loans specifically designed to help startups. These loans are available through various lenders. You can start with your local bank, or you can go to the SBA website to have them send you a list of lenders who are interested in your loan. You will need to put some money down for the SBA’s service. However, the SBA encourages banks to take chances on businesses that are growing. By taking some of the risk of your failing, the SBA makes banks more likely to approve your loan. Additionally, a benefit of going through the SBA is that they have advisors who can assist you in developing a solid business plan. This boosts your chances of success. In our advice, that alone is a good reason to go through the SBA.

5. Use Credit Cards

Though it’s important to be cautious of the high interest rates on credit cards, they are another option for starting a business with no money. This method can be useful for smaller expenses or as a short-term solution.

6. Obtain a Traditional Bank Loan

If you have a long-standing relationship with your bank and own personal assets outside your business, the bank is more likely to offer you a loan. Be aware though, that new businesses 2, 3, or 4 years old don’t have a lot of credit history and therefore are more risky for banks to loan to.

7. Consider Vendor Financing

If your goal is to work with a vendor (for restaurant supplies, for example), they might be willing to lend you money. This is called net terms. It’s an agreement that says you can borrow money from your vendor to buy stuff from them and pay them back later. Borrowing from a vendor is especially helpful for things like inventory because after selling the inventory, you can simply pay your vendor back.

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Still Have Questions?

We want your business idea to succeed, so if you’re still wondering which way to go, contact us. Your first discovery call with us is free.

Even though people think of lawyers as professionals you only go to if you’re in trouble, we take the opposite approach – we prepare businesses to succeed. On our Start A Business page, you’ll learn all about our approach to helping you launch a business that is positioned for success from the start.

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