How to Get a Business Loan With No Money Down? What Are My Options?

Most business financing products do not require money down or upfront fees. If you are dealing with a business lender or broker who asks for those, you should look elsewhere, as that is not standard practice. If you are purchasing a business or getting a commercial mortgage, down payments and some upfront fees for application, appraisal, and inspection are common.

As with any business loan, choosing the best business financing product for the job is important. Whether you are looking at no money down, reduced documentation, or limited business owner participation, there is always an impact on products, terms, costs, and fees. Always consider what you are sacrificing to obtain the capital for your business when making decisions, even if you are wondering how to get a small business loan with no money down payment.

The 7 Best Small Business Financing Options With No Money Down

Here is a list of the seven best options for small businesses when getting business financing with no down payment.

1. Long Term Business Loans With No Money Down

Long-term business loans have a repayment period of greater than two years. You are provided a lump sum upfront over a fixed term with a fixed monthly payment based on principal and interest. Long-term loans do not function like a business line of credit where you can draw funds as you go. These products primarily aim to fund business expansion and growth or finance long-term projects.

Long-Term Business Loan Product Overview

• Rates: Starting at 6% up to 18%
• Terms: 2 to 10 years
• Fees: Origination fees from 0% up to 3% of the funding amount
• Loan Payments: Monthly payments
• Credit Standards: Excellent to good credit preferred. A personal guarantee may be required.
• Processing Times: 3 days to a week

Benefits and Best Uses of Long-Term Business Loans

Business owners use a long-term business loan for long-term project financing or general business expansion that requires a lot of capital and affordable payments.

Learn More About Long-Term Business Loans

2. Business Line of Credit With No Money Down

A business line of credit is a revolving credit line that is open similar to that of a credit card. The credit line has a draw funds on-demand feature up to a pre-set limit. Business lines charge a interest rate off of current principal balance and will require a renewal or reassessment either semi-annually or annually by lender. Great product for cash flow needs.

Business Line of Credit Product Overview

• Rates: Interest rates starting at 1% a month simple interest
• Terms: LOC is a revolving line of credit renewed or reassessed quarterly, semi-annually, 12, 18, 24, or up to 36 months
• Fees: 0% to 3% Origination fees
• Payments: Monthly, bi-weekly, or weekly payments
• Credit Standards: Excellent/Good credit, but all credit considered
• Processing Times: Same day to a week

Benefits and Best Uses of Business Line of Credit

Flexibility to draw funds at any time is the most popular feature of a business line of credit and is used for cash flow needs or emergencies.

Learn More About Business Lines of Credit

3. Short Term Business Loans With No Money Down

Short-term small business loans are term loans with terms that range from 3 to 36 months to repay. Costs are based on interest rates or factor costs. Short-term loans are used when you can’t get approved for traditional business loan products. Less documentation is required and lower credit requirements than traditional small business loans For those reasons, short-term small business loans have higher approval rates than traditional business lending options.

Product Overview

• Rates: 1.09% up to 1.45% factor rates
• Terms: 6 to 18 months in duration (typically 12 months or less)
• Fees: 0% to 5% Origination fees
• Payments: Weekly, bi-weekly, and, in some cases, daily
• Credit Standards: Above 550 credit score is preferred, all credits considered
• Processing Times: Same-day funding

Benefits and Best Uses of Short-Term Business Loans

When approval for traditional business loans is not available, short-term business loans can come in handy. The primary use of this money is cash flow or funding short-term needs.

Learn More About Short-Term Business Loans

4. Business Cash Advance With No Money Down

Business Cash Advances (BCAs) are known as Revenue-Based Agreements. This product is not a loan but an advance based on current revenue repaid out of future sales of the business at a cost to the funder.

What is charged is not an interest rate, but is called a “factor rate” because it is a fixed cost of money and not simple interest. The payback amount divided by the advance amount is the factor rate. There is no benefit to paying off this product early unlike interest rates.

Repayment is made by a set percentage of future sale deposits of the business. The payments are collected by a convenience ACH payment withdrawn daily, weekly, or bi-weekly from the business's bank account. There is a reconciliation feature on an advance. Reconciliation occurs monthly at the end of every month giving the business the ability to adjust the amount collected in the form of a refund if the ACH payments collected exceed the set percentage of monthly sales specified in the agreement. The business owner can request a refund back to the business for overpayment so that the set specified percentage of sales collected for the business matches the sales volumes. There is no term limit.

Business Cash Advance Overview

• Rates: 1.11% up to 1.48% factor rate
• Terms: There is no term on a cash advance, repayment time frame based on future sales
• Fees: 0% to 6%
• Payments: Daily, weekly, or bi-weekly payments by ACH
• Credit Standards: All credit considered.
• Processing Times: Same day to 48 hours

Benefits and Best Uses of Business Cash Advance

A business cash advance is another option when traditional business loans are not available. The primary use of funds is for purchases, equipment, or working capital to improve cash flow.

Learn More About Business Cash Advance

5. Merchant Cash Advance With No Money Down

A Merchant Cash Advance (MCA) is a Revenue Based Agreement like a Business Cash advance but different in terms of the repayment process. The difference in the repayment process is instead of a fixed ACH payment, a set percentage of future credit card sales is deducted from every daily credit card processing transaction. Merchant Cash Advance takes that set percentage of future credit card sales disclosed in the agreement until the payback amount in the agreement is paid in full.

Merchant Cash Advance Product Overview

• Rates: factor rates ranging from 1.11% up to 1.48%
• Terms: there is no set term on a merchant cash advance. Based on future credit card processing volumes
• Fees: ranging from 0% to 6%
• Payments: Set percentage of future daily credit card processing deducted at the time of batch of credit card processing.
• Credit Standards: All types of credit are accepted.
• Processing Times: Same day to 48 hours

Benefits and Best Uses of Merchant Cash Advance

MCAs allow business owners to get flexible payments that flow with sales and protect profit margins versus a fixed payment. The primary use of funds is similar to BCA, which are purchases, equipment, working capital for small projects, and cash flow management.

Learn More About Merchant Cash Advance

6. Invoice Financing With No Money Down Required

Invoice financing companies provide an advance to business owners’ invoices that have been issued to clients but not collected. This is a form of receivable financing. The invoice is processed by the factoring company at issuance and funds are advanced to the issuer accelerating cash flow and receiving funds before the invoice is paid in full by the client. The invoice financing company for service rendered charges a fee that ranges from 1% to 2.5% off of the value of the invoice collected. The invoice factoring company assumes the role of collecting those invoices for the business owner. This is a great product to accelerate cash flow.

Invoice Financing Product Overview

• Rates: No interest rates. A flat fee is charged
• Terms: Set by invoice factoring agreement
• Fees: Fee-based on the client (ranges from 1 to 3%), invoice terms, and monthly service fees are a percentage of the volume of invoices.
• Credit Standards: No requirement for the issuer. The client's credit that the invoice is issued is evaluated.
• Processing Times: Invoices can be advanced and approved daily. The initial set up of a client cant take as little as a couple of days to 1 to 2 weeks to set up the relationship.

Benefits and Best Uses of Invoice Factoring

Invoice factoring is popular because it helps accelerate cash flow without waiting up to 90 days or more for invoices to be paid by clients.

Learn More About Invoice Financing

7. Business Credit Cards

Business credit cards are a revolving line of credit with a card that is issued for purchases or making payments for expenses. You only pay interest on the outstanding balance with monthly payments. Banks are the primary issuer and not business lenders. Very fast and flexible option for business funding

Business Credit Card Product Overview

• Rates: from 0% up to 29%
• Terms: revolving credit line
• Fees: annual fee may apply
• Credit Standards: good to excellent credit required
• Processing Times: instant to same day

Benefits and Best Uses of Purchase Order Financing

Purchase order financing is popular because it requires no money down and helps supplement cash flow in real-time without waiting up to 90 days or more for invoices. It also offers an affordable fee from the purchase order finance company.

Learn More About Purchase Order Financing

What Are the Pros and Cons of a Business Loan With No Money Down?

Listed below are a few pros and cons on how to get a business loan with no money down.

Pros Of No Money Business Financing

• Access to capital that traditional business loan options could deny without collateral or money down.
• No upfront fees

Cons Of No Down Payment Business Financing

• Can lock up and put at risk both personal and/or business assets that aren’t worth risking.
• Exposes your business to more liability and leverages debt

What Type of Originators Offer Business Loans With No Money Down?

• Traditional banks
• Business Loan Brokers
• Equipment Financing Companies
• Invoice Financing Companies
• Alternative Lenders

The Bottom Line: Advice, Tips, Warnings About Business Loans With No Money Down

For most business finance products, money down won’t be required, but don’t jump into business financing lightly. We are not saying it is a bad idea. We are saying you need to know the risks and the rewards. Do a cost versus benefit analysis when making decisions about getting financing for your business.

As a business owner, always ask yourself the key questions when getting a business loan. What are you using the capital for? What are the long-term benefits of accessing this capital for your business? What are your short and long-term risks?

If you ask the tough questions of yourself and are comfortable with your answers, then you will make better decisions on products and terms.

Check your disclosures and or offers and compare loan options, interest rates, fees and terms. Additionally, look for a personal guarantee, any down payment requirements, the reputation of the financial institution and any other loan terms.

Frequently Asked Questions