One of the most common questions I get asked is, “How can I start a business with no money?” Oftentimes, no money means no assets, no savings, bad credit, no families or friends to turn to, and does not know anyone who can invest in the planned business. Someone over at Yahoo Answers asked if given these circumstances, can they get a loan for their business?
Unfortunately it takes money to make money.
Banks will give you loan to start a business if you can prove to them that
- You have a sound business idea that could work
- You have the capability and experience to run the business
- You can repay them the loan
- In case things go wrong, they have something of yours that has value that they can get their hands on if you don’t pay
Small Business Administration (SBA) also requires the same things — afterall, lending institutions such as banks are the ones that give the loans and SBA merely guarantees the loan. Another important factor is that you must show your own commitment and trust in your business — and this you can demonstrate by putting in equity investment. Yes, they want you to show to them that you have money that you can put into your business!
SBA and banks will not give you 100% of the money you need. They will at most give you 80%, and SBA in many cases will not give the full loan amount up front. Sometimes the loan amount is given in a staggered way, while sometimes you need to spend first and show your receipt and then SBA’s lending partner will reimburse the expense.
You can read about SBA’s lending criteria and eligibility requirements on these pages
Credit Factors a Potential Borrower Should Know http://www.sba.gov/financing/preparation/qualify.html (#1 credit factor is equity investment)What Will I Need to be Considered for SBA Loan Assistance? http://www.sba.gov/financing/preparation/requirements.html
If you don’t have any resources, you can either
(a) wait and save until your financial situation improves
(b) downscale your plans
(c) start a business that you can afford given your present resources
(d) or find an investor willing to give you the equity you need while you run the business — be ready though to give up portion of your ownership as well as decision making capabilities
I suggest you read the following books to give you more information on how to raise funds for your startup business if you have no money
- Starting a Small Business of Your Own With No Money
- How to Start Your Own Business with No Money and No Risk
- Start Your Own Business for $1,000 or Less
PowerHomeBiz.com has several articles that you may want to read: