Starting a business requires minimal capital. Without that, one cannot think about launching a full-fledged business on a good note. A business can thrive if backed by good investors. Else, you will need funding to support the business operations. In the absence of investors, you will need to explore different business loans suitable to your capital and credit requirements.
Businesses having a good cash flow are considered reliable borrowers by lenders. As opposed to this, a business stepping into the field faces challenges securing one. Yearly revenue and the business plan and credit score play a crucial role in business loan approval.
If a business has negative cash flow, lenders seem hesitant to lend money. Negative or no cash flow is a clear indication of failure on repayment of the loan. A lender wishes to avoid it at every cost. What can you do in this situation? Check out loans for people on benefits!
What is the Purpose of On-Benefit Loans?
There are certain benefits provided to individuals in the UK in the initial stages of unemployment. These benefits aim at helping such individuals meet basic requirements for survival. However, if you have lost your job and unemployed working on your business idea, benefits alone don’t suffice lifestyle.
Many lenders deny and disapprove the loan application for the people living on benefits. It is because these people lack financial stability. Some lenders provide loans to people on benefit for individuals to bridge every requirement without waiting.
New businesses looking for low-cost borrowing opportunities to kick start business need a whopping amount to start. So, loans for people on benefits could be of little help there.
Depending on these circumstances, one ideal option for businesses is business loans.
What Are Startup Business Loans?
The UK government backs startup business loans. The government charges a fixed interest rate of 6%. The business can repay the loan over five years. Businesses need not fear application or early repayment fees. And according to UK government guidelines, one gets the needed guidance to develop and define the business plan. The applicants get up to 12 months of free monitoring.
Eligibility for a business loan:
- One must be a permanent UK resident
- Should be 18 or over
- Planning to start or be in operation for less than 36 months
If you feel you meet the eligibility criteria, you can apply for a business loan.
What is the Possibility of Getting a Loan Without Money?
As mentioned at the beginning of the article, you need minimal balance or capital to qualify for the loan. Every entrepreneur needs money to run a business successfully. Lenders need to ensure you have enough money in your account while approving you for additional credit.
If you have a less than perfect credit score, you may face further challenges. So, before taking business loans on bad credit, analyze and tap into existing funds you have in the form of – emergency funds, retirement funds, income from benefits (if any), spouse income, income from dividends, cash reserves, etc.
Lenders check their cash flow when lending money to businesses with low credit scores. If you have enough cash in your bank to get the loan, the lender may grant you the loan. Businesses with a good credit score and finances get immediate money assistance compared to bad credit businesses. Businesses with bad or poor credit need to put up collateral or get a guarantor to get the business loan on bad credit.
The collateral could be a business asset like equipment, business profits, property, investments etc. If these don’t suffice, the lender may tap into the business’s owner’s personal belongings as well. On the contrary, if you apply for an unsecured business loan, you may get one at a higher interest rate. Getting one on bad credit may require a guarantor on a loan. So, it may eventually increase the overall cost of borrowing.
So, what you can do?
You can leverage some options to get a business loan without money. Here they are!
1) Business Credit Cards
Business cards let you borrow up to the limit promised. If you pay the monthly balance timely, you can avoid accruing on a loan. It is ideal for businesses with little or no cash flow as it needs personal income and credit score for qualification. Here you do not need to demonstrate business statistics to get the loan. If you have a high credit score, get a loan almost instantly.
2) Invoice financing
Yes, you can borrow funds by revealing the invoices. Some lenders provide funds on the pending invoices. So, you do not have to wait any longer for the payment to release. You can borrow funds and meet business needs.
In this, invoice financing firms use your invoices as collateral to provide loans. These companies provide 80% of the missing cash to meet your needs. They value your invoices as much as you do. It is an ideal option for businesses with limited or no cash.
3) Equipment financing
Equipment financing is one of the best ways to get your business finance lacking money. Equipment financing includes everything from furniture to large-scale machinery. Instead of an invoice, equipment works as collateral to get the loan approval.
Equipment proves a solid proof of security before the lenders. It is why lenders approve businesses and startups with no cash flow. Businesses need to prove loan affordability through business projections and business plans. Yes, you can get the loan with limited or no cash flow to streamline business processes. Make the ideal choice for your business needs.
