Launching a business is no easy feat. For as much as social media gurus love to talk about how everyone should have a hustle or launch their own business, the reality is often far different. While coming up with an idea can be hard enough, the truth is that most businesses will fail long before they reach the five-year operation milestone. 

Real barriers like funding a startup business as one tries to shift it from a labor of love to a profitable venture make that grim statistic a reality. In the beginning, most business owners are entirely self-funded. And while this can give one a sense of accomplishment, it also means that there can be lean times. Eventually, startups are going to need a cash infusion which is where the business loans come in. 

Understanding The Basics Of Startup Business Loans

While business loans might seem like mysterious products, they are not much different than any other kind of financial loan offering. Simply put, a financial institution fronts a business owner’s money in exchange for a pre-set repayment schedule. This money can either be distributed as a lump sum or as a line of credit. Unlike regular loans for personal needs or a mortgage, business loans tend to offer better terms, lower interest rates, and more flexible repayment options. 

Most people are familiar with unsecured loans. However, this kind of business loan will look at a company’s monthly revenue to determine whether it is a good idea to agree to lend funds. These types of loans are usually reserved for businesses that have been active for several years with an established history of consistent profits, low debt, and a variety of other underwriting factors. However, for very new startups that do not have this, sometimes the founder’s credit rating may be used. 

Options For Startup Loans With No Money

Unsecured business loans may be the norm, but they can be very unrealistic for many startups that lack sufficient revenue or a longstanding track record. Alternatively, the below options may be a solution for cash-strapped entrepreneurs or even businesses that would like to have a cushion to fund new ventures, research and development, marketing campaigns, and more. 

Secured Business Loans

Secured business loans often rely on the applicant offering collateral to “front” the loan — similar to secured credit cards. In most cases, this will usually be something tangible such as physical property, a car, or even equipment needed for general operation. While this can provide essential capital when a business needs it, just be aware that if businesses default on the loan, the financial institution has the right to take the collateral as payment. 

Business Credit Cards

Although many people do not think of credit cards as loans, that is essentially what they are. A financial institution deems an individual or business entity creditworthy enough to extend them a credit limit. Just be aware that a new business will often have to apply by using one of the founder’s credit scores. So, to maximize your chances of being approved, be sure that any individual used as the applicant has a strong credit score of around 690 or higher. 

Equipment Financing

Depending on the operational needs, equipment financing might be more beneficial than having liquid capital for the “what ifs” of running a business. Equipment financing allows business owners to plan for more expensive purchases by essentially entering into a buy now and pay later agreement. Applicants still need to exhibit creditworthiness, but there are typically fewer hoops to jump through to reach a positive decision. 

Invoice Financing

This may be the option many startup owners are more familiar with thanks to countless online ads advertising how easily liquid capital can be accessed as long as a minimum amount of revenue is earned every month. Simply put, this type of agreement borrows against future earnings. While it might not be realistic for a completely brand-new business, it would be a smart arrangement for a firm that just started but has developed strong sales in a short amount of time. Just be aware that the minimum threshold to be considered for this type of financing scenario is around $3,000 per month. 


As conversations around equitable access to capital continue to dominate small business discourse, microloans are an increasingly popular option. As the name implies, this type of financing is for typically smaller amounts than larger financial institutions would generally consider. Often the maximum threshold for a microloan is $50,000. The terms tend to be better for these types of loans and may even be a realistic option for businesses with little to no revenue on record. 

Seed Investors/Crowdfunding

Investing is not just for buying stocks on the NYSE. One way some businesses gain access to liquid capital is by bringing on what is known as seed investors or launching crowdfunding campaigns. While this might not be a realistic option for everyone, sourcing multiple seed investors can allow a business to pool money across several sources to either get off the ground, launch new products or services, or scale existing operations. 

Similarly, crowdfunding provides the same access to capital but allows a business to leverage very small donations from a wider pool of consumers. The only downside to crowdfunding is that traditionally when launching a campaign on platforms like Kickstarter, a company must meet the crowdfunding goal to withdraw the funds. 

Finding The Right Loan

Regardless of whether an entrepreneur is approaching a traditional lender or one of the alternative financing options, it is always important to be prepared. Be sure that any potential assets that will be used as collateral, as well as credit reports, are accurate and meet the minimum requirements to be considered for the loan. Likewise, be sure that lender requirements are fully understood — as well as repayment terms or penalties for late payments. 

Also, be realistic about how much money can be requested. The higher the loan amount, the higher the monthly payments will be. Similarly, more creative financing options might have more frequent payment expectations such as weekly or even daily in extreme cases. And finally, when bringing on outside investors or crowdfunders, always be mindful of whether growth projections are realistic and whether or not the product being offered in exchange for a crowdfunding pledge can be fulfilled.