Business Expansion

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

Last updated on June 23, 2020

Jacques Famy Jr

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 are common, as well as some upfront fees for application, appraisal, and inspection.

As with any business loan, it’s important to choose the best business financing product for the job. 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.

The 7 Best Small Business Financing Options With No Money Down

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. The primary purpose of long-term business loans is to fund business expansion and growth or to finance long term projects.

Product Overview

Rates: Interest rates starting at treasury index plus 1% to 2.5%

Terms: 2 to 10 years

Fees: 0% to 3% Origination fees

Payments: Monthly or bi-weekly payments

Credit Standards: Good to excellent credit preferred, all credit considered

Processing Times: 3 days to a week

Benefits and Best Uses of Long Term Business Loans

Business owners use long term business loans for long term project financing or general business expansion that requires a lot of capital.

Learn More About Long-Term Business Loans

2. Business Line of Credit With No Money Down

A business line of credit is an open, revolving line of credit similar to that of a credit card. It allows business owners to draw funds on-demand or make purchases up to a set credit limit. A business line of credit charges a principal and interest rate and requires renewal either semi-annually or annually.

Product Overview

Rates: Interest rates starting treasury index plus 1% to 2.5%

Terms: Open revolving line of credit with no term limit

Fees: 0% to 3% Origination fees

Payments: Monthly, bi-Weekly, or weekly payments

Credit Standards: Good to excellent credit preferred, 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 business loans provide a lump sum upfront over a fixed period typically repaid within 6 to 18 months. A “factor rate” or fixed cost of money is charged for most short term business loans. This product is used when you can’t get approved for traditional business loan products. It offers reduced documentation requirements and credit tolerances that are laxer than traditional business loans. Payments are more frequent (bi-weekly or weekly) to compensate for the higher risk they are taking. For those reasons, short term 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 preferred, all credit 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 a Purchase of Future Sales Agreement. The business owner receives an advance of future sales and is responsible for paying back a fixed amount greater than the advance.

A “factor rate” is also charged, which is the difference between the advance amount and the payback amount. Factor rates do not function like principal and interest rates because you make fewer payments if you pay them off early.

The BCA is repaid by taking a specified percentage of future overall sale deposits. The payments are collected by an ACH daily or weekly from a business bank account based on the specified percentage of future sales. Reconciliation can occur at the end of every month if the fixed payments exceed the month’s set percentage of sales, as described 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.

Product Overview

Rates: Factor rates range from 1.09% up to 1.45%

Terms: No term limits, repayment period dependent on future sales

Fees: Origination fees 0% to 5%

Payments: Weekly or daily ACH payments

Credit Standards: Poor to excellent credit accepted.

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 Purchase of Future Sales Agreement like a BCA and is very similar. The most significant difference is the repayment process which is connected to the future credit card sales instead of overall sales. MCAs take a set percentage of future credit card sales until the advance is paid back in full.

Product Overview

Rates: 1.09% up to 1.45% factor rates

Terms: No term limits (payoff depends on future credit card sales)

Fees: Origination fees 0% to 3%

Payments: Set percentage of future credit card sales withdrawn at the time of batch of credit card sales

Credit Standards: All credit is accepted.

Processing Times: Same day to 48 hours

Benefits and Best Uses of Merchant Cash Advance

MCAs allow for 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 provides an advance to business owners’ invoices that have been issued to clients but not collected. There is no need to wait for outstanding invoices to be paid by the client with invoice financing in place. The invoice finance company advances the money to the business owner in exchange for a fee that ranges from 1% to 2.5% off of the face value. The invoice factoring company assumes the responsibility of collecting on those invoices for the business owner.

Product Overview

Rates: None

Terms: No term limits

Fees: 1% to 3% fee based on the invoice, monthly service fees depending on the volume of invoices

Credit Standards: Credit of clients needs to be favorable

Processing Times: Advances daily off of invoices created, 1 to 2 weeks to set up an invoice financing 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. Purchase Order Financing With No Money Down Required

Purchase Order (PO) financing does not require any money out of the pocket of the business owner. It provides capital to pay suppliers upfront for verified purchase orders. Purchase order advances will finance an entire order or a portion of it, depending on the purchase order and scenario. When a supplier is ready to ship the order, the financing company collects payment directly from the customer. The purchase order funder then will subtract their fees and send an invoice to the business owner.

Product Overview

Rates: None

Terms: No term limits

Fees: Each purchase order will cost between 1% to 5%

Credit Standards: All parties need favorable business credit history, but all credit is considered

Documentation: Purchase order samples, contact and owner information for all parties involved

Processing Times: A few days to set up a relationship, then purchase order financing can occur daily

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?

Pros

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

Cons

  • 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 Lenders Offer Business Loans With No Money Down?

  • Traditional banks
  • Private lenders
  • Online business lenders (Fintech)
  • Long-term business lenders
  • Equipment financing companies
  • Invoice factoring companies
  • The Small Business Administration (some products require collateral)
  • Private lenders
  • Hard money business 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.

Always check your proposals, term sheets, and agreements for the cost of money (interest rate or factor rate), all closing or funding fees, term duration, payment frequency, personal or business guarantees, and any collateral requirements.

Frequently Asked Questions

Do I Need Money Down to Get a Business Loan? Can I Get a Business Loan Without Any Money?

You do not need upfront money to get most business loan products. Keep in mind, business funders and lenders will charge fees that are deducted from proceeds at the time of funding. Always check the terms and conditions of all business financing you are considering.

Are No-Money Down Business Loans Difficult to Obtain?

It is not difficult to find or obtain business funding with no money down. The qualification requirements focus on the personal credit of the business owner, business credit history, recent cash flow health (business bank statements), industry, time in business, and other financial reports.

Can I Qualify for a Business Loan With No Money Down If I Have Bad Credit?

Yes, you can get approved for business funding with no money down if you have bad credit. Be aware: The rates, costs, and terms will be affected by your credit risk, as well as what can be offered to you.

If I Am a Start-Up Business, Can I Get a Business Loan With No Money Down? 

The short answer is no. It is hard to get start-up financing if you have no money to put down and no collateral. You can try to get a start-up business loan from private business investors, but that’s not considered business finance.

How to Apply for a Business Loans With No Money Down?

Applying for a loan with AdvancePoint Capital is simple. Start with this online form, then fill out the short application page, wait a few hours for your approval, and then get your money!

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