How to Get Your Startup Business Loans With No Revenue. Getting venture capital or angel funding can be a game-changer for any startup business. The right cash injection can give you the breathing room to scale your business, hire new team members, develop new products and services, or even expand into new markets.
Getting an external loan can also provide a necessary boost to your cash flow and liquidity requirements. In this blog post, we’ll cover everything that will help you get your startup business loans with no revenue so that you don’t end up as a lender instead.
Read More: Things to Consider Before Signing Up for a Startup Business Insurance Policy
Be Prepared to Be a Salesman and a Negotiator
You may have a great business idea and a solid execution plan. However, you will still need to convince potential lenders that your business is worth the investment. You’ll need to be prepared to present your business in the best possible light, including being ready to answer any questions about your business, including how you plan on spending their money and what you hope to accomplish with it.
Be prepared to negotiate with lenders as well; this is their money, after all, and they will want some assurance that it won’t be wasted. If you are seeking funding from an angel investor or venture capital firm, be prepared for them to ask for equity in your company in return for the investment. This is perfectly normal practice, so don’t get upset or offended if this happens; be sure that you are comfortable giving up equity before signing any contracts.
Do Your Homework and Research Potential Investment Sources
You may be surprised to know that there are several sources of startup funding that most people don’t even know about. If you have time, it can be wise to research potential funding sources and list the ones you are most interested in pursuing. If you are pressed for time, it can still be helpful to understand the different types of funding available to decide which is best for your business.
Ask Other Entrepreneurs for Their Recommendations
This may seem an obvious suggestion, but many entrepreneurs overlook this strategy and instead try to find information through Google searches or by talking with friends who aren’t knowledgeable about startup funding sources. There is nothing wrong with using Google or asking friends, but if you want the best possible advice, ask those who have been there before; other entrepreneurs in your area who have successfully raised capital will be your best bet in this case.
Establish Your Use Case
When applying for a loan from a bank or other financial institution, you’ll be required to provide a use case for the loan proceeds you request. This use case will be part of your case for why the bank should give you a loan, and it’ll be one of the first things the bank will assess.
In your use case, you’ll need to give the bank a high-level overview of your business and how they can benefit from the loan. You’ll also need to provide a qualitative explanation of why the bank will benefit from the funds. If the bank or financial institution can’t see how funds can be used to increase their bottom line, there’s a good chance they’ll decline the loan.
Demonstrate your Scalability
Once you’ve got your loan in place, you’ll be able to expand rapidly and hire additional staff as your business grows. This is one of the key advantages of outside financing. However, this advantage makes it important to demonstrate that you can scale. Demonstrating scalability will show the bank that you can bring in recurring revenues.
This means you’re generating enough cash to cover costs, make a profit, and have enough left over to reinvest. There are a few ways to demonstrate your scalability. You can generate a proof of concept, create customers, or get a commitment from a large customer.
Prove That You’re Profitable
Again, once you’ve got the loan in place, you’ll be able to grow rapidly and hire additional staff as your business grows. This is one of the key advantages of outside financing. However, this advantage also makes it so important to prove that you’re profitable. Profitability shows the bank that you have a real business making a profit. There are a few ways to prove that you’re profitable. You can generate a proof of concept, create customers, or get a commitment from a large customer.
Include Stringent Co-founder Conditions
Many banks will require business owners to become co-signers on loans. This means they’ll be jointly liable for the debt. One of the benefits of this is that if the owners can’t meet their financial obligations because of poor business decisions or circumstances outside of their control, they’ll be liable.
But co-signing loans can also be a real obstacle. Suppose one of the co-signers can’t make payments because of financial hardship. In that case, the bank may hesitate to grant you additional financing. You’ll want to hire an attorney to help you negotiate the terms of the loan so you can obtain a non-bond loan.
Don’t Be Afraid To Ask For An Increase
Many loans have variable interest rates. This means that the interest rate on a loan may change over time, either up or down. Some banks will grant you a loan with a fixed interest rate. This is great because it eliminates the risk that the interest rate on your loan may go up by as much as 50%. But other banks will offer you a “floating rate” loan.
A floating rate loan is when the interest rate on your loan may rise or fall over time. You’ll want to ensure you get a fixed-interest rate loan. But, if you aren’t, you may want to ask the bank if they’d be willing to give you a fixed-rate loan with a higher interest rate.
Bottom line
Getting a business loan without revenue can be challenging. There are a few things you can do to make it easier. Establish a use case for the loan and demonstrate that you can scale. Prove that you’re profitable and include stringent co-founder conditions. Don’t be afraid to ask for an increase, and don’t be afraid to get a loan with a higher interest rate.