As we come out of an unprecedented pandemic, new and current business owners are looking to expand. The time is ripe to start a new business and launch yourself into the future with the economy booming again. However, a consistent hurdle for new businesses is a lack of income to get past the first two years of business. In short, companies require start-up business loans to get established. Start-up business loans, such as business credit cards, are a premium option for individuals looking to start a business until they can generate revenue.
The roadblock many new business owners face when applying for business loans is that they don’t have the income necessary. Most importantly, lenders want safe businesses to invest in, so they are guaranteed the money they lend. In these situations, loan options such as 0% business credit cards are available. While the terms are steeper than longer-term loans, these options provide the liquidity owners need to establish their businesses.
What is a Start-Up, and Why is it Difficult to Attain Start-Up Business Loans?
A start-up is going into business to make a sound profit within the first two years. They are often focused on a single product or service. They lack the funding to take their business to the next level. Start-ups exist in a volatile grace period where they have to prove to investors and lenders that they are worth investing in.
The biggest hurdle small businesses face when they start is proving a reliable financial track record. Usually, lenders look at a business’s credit history and income to determine loan eligibility. Lenders without these metrics look at your credit history and overall business experience. Your personal credit history is a good indicator of how responsible you will be with a loan, just on a smaller scale.
However, many individuals face the issue of low credit scores or red flags on their credit reports. In these situations, traditional lenders such as banks will probably be unwilling to assist small business owners in need. They see numbers and stay away from start-up business loans for those without income. Luckily, online lenders such as BitX funding can work with you depending on your circumstances and find the best start-up business loan for you.
Start-Up Business Loan Options
Because of the high risk associated with start-ups, it is understandably challenging to apply for start-up business loans. However, several loan options are still available if you have low or no income to sustain your business. For example, business credit cards are an excellent way to leverage your credit until your business can maintain its income to apply for larger loans.
Start-up business loans can acquire equipment, supplies, and real estate and pay your business bills, wages, and overhead. As long as you use the funds to invest in your business model and improve your business, there is much you can use the loan liquidity towards.
The Small Business Association (SBA) is a government-run agency that assists small businesses with getting the loans they need to be successful. Rather than directly lending money, the SBA acts as a middleman between lenders and borrowers. Lenders give loans to borrowers, and the SBA covers small businesses if they cannot meet their payments. Because lenders have the SBA’s security, it will likely give loans that the SBA approves. For these reasons, SBA loans are a highly desirable loan option for those that get approved.
Further, SBA loans are very competitive because of their low APR and favorable terms. However, because the SBA is taking on the loan’s risk, their requirements for lending are steep, while the approval process is lengthy and challenging to apply for. The best SBA loan options are the SBA 7(a) loan and the microloan program. Both require you to be for-profit and small businesses according to their guidelines.
SBA loans are the premium loan option for small businesses. While receiving SBA funding as a brand-new business is possible, this option is best for those currently generating revenue and with significant collateral. If you are a new start-up with no income yet, consider the following options for your business.
0% Business Credit Cards
One of the consistent hurdles for businesses with no income is their lack of credit history. Business owners can bypass this by using their personal credit history to apply for 0% business credit cards. You leverage your personal credit history to receive adequate funds for your business. Then you are solely responsible for paying off the card. If your credit score is lacking, consider building up your credit first to apply for the right business credit card.
Personal Term Loans for Business
Another start-up loan business owners can leverage their credit towards is the personal term loan. As the business owner has a 700+ credit score and $50k+ in annual personal income, they can receive a personal loan of up to 300k. Even though it’s a personal loan, funds can be put toward the small business as a startup business loan. These funds can be used for payroll, overhead, bills, and even to build personal credit.
Personal term loans are attractive because they can be unsecured or require no collateral. They also offer a robust yet flexible way to supplement early income. Further, the loans have a 5-7 repayment term with no prepayment penalties. However, because personal loans don’t require collateral, they boast higher interest rates compared to other loans, typically around 12%
Many businesses, especially those in the service industry, see significant swings throughout seasons, especially during their first two years. For example, a new restaurant could bring over half of its earnings during holiday seasons and witness long dry periods where they need extra funds to meet overhead costs. In these situations, invoice or accounts receivable financing is the best way to supplement your income.
Invoice financing involves taking out a short-term loan against outstanding invoices. The lender charges a percentage fee for the invoice and provides a small loan to cover the cost of the invoice. You transfer that money to the lender to pay off the loan when you receive payment. Invoice financing is an attractive option for new businesses because it provides instant funds to small businesses with built-in fees and collateral as part of the loan. This option is best for companies with outstanding invoices or asymmetrical cash flows that need consistent liquidity to manage their overhead.
Get Funding for Your Start-Up Loans Today with BitX Funding
As we emerge from the COVID-19 pandemic and the economy returns to its upward trajectory, start-up businesses are in an optimal position to flourish in the years to come. The economy is rising, and the demand for goods and services is increasing. However, due to the volatile nature of new businesses, it can be challenging to get start-up business loans for small businesses. Traditional banks have restrictive guidelines for startups with no income and are unwilling to loan to new businesses.
Fortunately, online loan lenders such as BitX Funding want small businesses to succeed and have a full suite of loan options for business needs. The funding is out there. You require the right lender to guide you through the process and get you started. If you’re a start-up business owner with no income, contact BitX Funding today to discover the best options for your business.
For more information on start-up business loans, contact BitX Funding by phone or email, or fill out the form below.