Scaling Up:
The Vital Role of Pre-Revenue Small Business Loans
Starting a small business and making money can be a big challenge, especially if your business is less than two years old or hasn’t made any money yet. These kinds of businesses need financial help to get off the ground. The solution is to get a small business loan, but it can be hard to find one. However, there are online lenders like BitX Funding that can help. They offer loans to businesses like yours, even if you haven’t been around for long or made any money yet.
Banks usually don’t want to lend money to start-ups or businesses that haven’t made any money yet. But online lenders like BitX Funding are different. They can give you the money you need to start your business, even if the loan terms are different from what established businesses get. In this article, we will explain what a pre-revenue business is, talk about different ways to get funding and give you advice on how to get started.
Defining Pre-Revenue Businesses and Their Revenue-Generating Needs
A start-up business is a business that has just started and has been around for less than two years. These businesses have a plan to earn money in the future, but they currently need funding to reach that point. Banks are typically not willing to give loans to these businesses because they haven’t been around for very long.
Pre-revenue businesses typically have a product or service ready to sell, but they don’t have enough money to pay for things like equipment, a place to work, employees, and other costs. For example, let’s say you want to open a restaurant in your area. You have enough money to get started and hire people, but during the first few months, the costs of paying employees, rent, buying equipment, and getting supplies are more than the money you make from customers. In this case, your restaurant would be considered a pre-revenue business until you start making a lot of money.
To solve this problem, pre-revenue businesses can get a small business loan. With the right loan, these businesses can get the money they need to cover their costs and invest in their future success. But since traditional banks are usually not willing to help start-ups, pre-revenue businesses need to look for other options. Luckily, online lenders can give them the money they need quickly and make the process easier.
Options for Pre-Revenue Business Loans
Pre-revenue businesses have funding options. Resourceful owners can secure funds for success. Lack of reliable credit score limits options. Banks lend to established businesses based on cash flow and credit score.
However, there are several smaller loan options where you can leverage your personal credit score to access funds that would otherwise be unavailable to your business. Another option is leveraging potential future sales to secure immediate funding. Below are three attractive loan options for pre-revenue small businesses:
Personal & Commercial Term Loans for Pre-Revenue Businesses
- No years in business are required.
- 700+ personal credit score
- Verifiable personal income of $50,000 +
In many cases, founders of pre-revenue businesses have excellent personal credit and business track records. However, lenders are reluctant to finance these ventures due to the absence of revenue generation. In such situations, business owners can utilize their credit history to obtain a personal term loan, which they can then apply to their business. Pre-revenue business owners can secure up to $300,000 in funding provided they have a personal credit score of 700 or higher.
Although it is a personal term loan, the funds can be used for business expenses such as real estate, maintenance fees, payroll, and other overhead costs. This option is best suited for individuals with exceptional credit who require a substantial infusion of funds to kick-start their pre-revenue businesses.
Unsecured Business Line of Credit
- 6–12 months or more in business
- 600+ credit score
- Generating yearly revenue
Businesses often require occasional financial boosts to navigate through periods of uneven cash flow. In such cases, a large loan is not necessary; rather, having access to sufficient funds to cover expenses is crucial. An unsecured business line of credit (LOC) serves as an appropriate option for pre-revenue businesses in these circumstances.
Business line of credit function similarly to credit cards, offering a fixed amount of funds that can be drawn upon at any time and repaid according to the business’s capabilities. LOCs can be secured (requiring collateral) or unsecured. Unsecured options have stricter terms and offer fewer funds than secured LOCs. However, for pre-revenue businesses, the unsecured option is preferable since it does not require collateral. Business LOCs are best suited for companies ready to launch but in need of flexible funds to cover costs until profitability is achieved.
Merchant Cash Advances
- 6–12 months or more in business
- 500+ credit score
- Generating yearly revenue
Merchant cash advances (MCAs) differ from traditional loans, acting as a flexible funding plan rather than a straightforward loan. MCAs provide businesses with a lump sum of cash, using future credit card sales as collateral. Business owners can utilize these funds as needed and repay them through their company’s sales. Typically, a fixed payment schedule is established with the lender, and a percentage of the total credit card sales is allocated toward repaying the MCA during each payment period.
Lenders evaluate the risk associated with MCAs based on the borrower’s credit history and time in business. For instance, if you receive $100,000 in funds with a factor rate of 1.2, you will need to repay $120,000 to the lender. While the loan amount may be lower than that of traditional loans, MCAs still provide an excellent source of funds in specific cases. This option is particularly beneficial for retail or restaurant pre-revenue businesses that rely predominantly on credit card sales.
Obtain Pre-Revenue Funds Today with BitX Funding
Right now, there are a lot of start-up businesses, but many small businesses are still in the pre-revenue stage. These businesses hold great potential but require additional funds to initiate their operations. Unfortunately, banks don’t want to help these kinds of businesses because they’re too new.
But BitX Funding specializes in giving loans to pre-revenue businesses. They offer different options for small businesses through online lenders. They can help you get the money you require by using your good credit and future sales.
If you want to know more about loans for pre-revenue small businesses, you can call BitX Funding at 203-763-1430, email them at [email protected], or fill out a form on their website. They are licensed and insured, and they know a lot about what banks are looking for. They have helped a lot of customers already, and they can help you too.
