How to Get a Small Business Loan When You Have No Money

Rachel Curry

Rachel Curry

Published on: 24 January, 2023

Updated: 24 March, 2023

Self Starter Entrepreneur

Toss the old trope, “you need money to make money.” 🤾🏽‍♀️ As a modern solopreneur or small business founder, there are many ways to launch your business without a mattress full of cash. One way to do so is by getting a small business loan—which you can do even without having money for a down payment.

As with any type of loan, there’s a right way and a wrong way to go about it. Here’s what you need to know about getting a small business loan when you have no money, including how to obtain the loan and any obstacles and risks you’ll want to avoid along the way. 

If you can’t bootstrap a business with your own funds, you have options

Before we dive into the how of it all, it’s important to get you in the right mindset. 💭

Hopeful business owners often feel like they have to bootstrap their new business themselves with no help. That couldn’t be further from the truth, but this belief is why more than 60% of startup founders use their personal savings to fund their venture.

This is okay, but it’s not the only option—which is an especially exciting prospect for people who may not even have the savings to get started on their own.

Small business loans provide an option for entrepreneurs seeking outside financing. Moreover, there are multiple types of small business loans you can seek.

You can get a small business loan from places like:

🏦 A traditional bank or credit union 

💻 An alternative online lender

💳 A credit card company

🤝🏾 A trusted friend or family member

Traditional lenders may have hurdles like requiring a down payment, mandating a personal guarantee, and having a minimum personal or business credit score, but online small business lenders and interpersonal lenders tend to be more flexible. 

Friends and family loans can be legit, too. Through Pigeon, you can create loans with your friends and family. Build a loan with a contract, or customize a repayment schedule with interest, funding your business with help from a loved one is an amazing option to consider too. 🐣 

We’ll dig more into these options in more detail below so that you can make the right choice for you! 

Choosing an Option

How to get a business loan (with no money)

When it comes to securing business financing with no money, you have a few loan options:

  • Bank or credit union 

You can get a term loan (short-term loan or long-term loan) or business line of credit from a traditional financial institution. If you’re a startup with no credit or money to your business’s name, a bank loan might be the most difficult option. However, it’s not impossible—and it’s good to be aware that it is an option, even if you think it’s not. If you’re feeling frustrated or want to avoid the headache of dealing with a traditional financial institution, check out the other financing options. 👇

  • Alternative online lender

There are many alternative lenders online today, but it may take some research to unearth the right one for you. Plus, know the signs of an online personal loan scam— has some great tips for how to spot red flags.

  • Business credit card

After qualifying for a business credit card, you can take advantage of introductory 0% annual percentage rate (APR) periods as a sort of loan. Be very careful to pay your balance before this ends—the average business credit card interest rate was 20.17% in November 2022, according to data from The Balance. Aside from the risk of debt, going over a credit utilization ratio of 30% could harm your credit report.

  • Friends and family loan

If you have a trusted friend or family member who’s willing and able to provide you small business financing via a loan, this is a great way to go. You can negotiate a low-interest rate that still meets the latest Applicable Federal Rate (AFR) requirements for the U.S. - Pigeon provides a space for you to set up a loan stress-free which will make everyone comfortable. 🤝 

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How hard is it to get a business loan with no money?

There’s more to a loan than simply the loan application process. The difficulty of getting a business loan depends on the lender you’re dealing with and your status as a borrower (including your existing business assets and creditworthiness).

Interpersonal loans with friends and family tend to be the easiest route—especially when you use a platform like Pigeon, which is specifically designed for ease of use from the moment you create the loan contract to the time you make the final payment. 🐣 This option enables you to have easy access to financing without needing to have the money upfront.

While the U.S. Small Business Administration (SBA) does have SBA loan programs for small businesses (including microloans, equipment loans, and more), these types of business loans are typically reserved for businesses already in operation with some sort of working capital to their name. These eligibility requirements aren’t set in stone, but you may want to reserve this option for later on when you plan to expand your business.

Risks of business loans when you have no money (and how to avoid worst-case scenarios)

The clearest risk of getting a business loan when you have no money is being unable to make monthly payments. 

Heads up: Failure to repay can lead to bad credit for your business and can eat away at your personal credit score. On the flip side, repaying on time every time can help you build good credit, making future financing easier.

When you get a loan, negotiate repayment terms that give you wiggle room. You can also consider operating a lean startup with a lower loan amount in the beginning. That way, even if your financial statements don’t hit their projections, you’ll likely still be in the clear.

Some loans (like bank loans) are bound to charge higher interest rates than others (like interpersonal loans). If you want to avoid this, be aware of the lender you’re dealing with and ask yourself: Is there a better way?

What’s next after getting a business loan with no money? 

Once you’ve sifted through your funding options, completed a business loan application or come to an agreement with a loved one, and have your capital in hand—what’s next?

Just like a business plan, small business owners with a loan will need to create a thorough plan of action for how they’ll make the most of their loan. Here are a few next steps:

  • Build your credit history and increase your business credit score by making timely payments.
  • Optimize your quarterly and annual revenue (prioritizing your key profit generators).
  • Regularly address cash flow and make any changes to spending as needed.
  • Be mindful of changes in your business needs and lean toward sustainable growth.
  • Build a track record of dependability and openness with your customers and partners.

When all is said and done, lending options like these give you the chance to start an empire—with no upfront money required. As you begin to earn revenue and profit, you can strategically reinvest those funds back into the startup you’re proud to have launched from scratch! 💪

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About the author

About the Author

Rachel Curry


Rachel is a highly educated graduate of the University of Delaware and a professional writer with extensive experience in personal finance, corporate communications, social media, and blogging. She specializes in writing about small business finance and entrepreneurship, providing insightful advice and guidance for small business owners. Her writing for Pigeon is extremely beneficial to the community, as it has helped thousands of people make more informed decisions about their financial lives and relationships.