The Best No Money Down Small Business Loans for Tight Cash Flow

For a small business owner, there are many things to consider when it comes to running a business. Emergencies, unexpected expenses, and even just day-to-day operations take a lot of cash flow. Therefore, it makes sense to consider a small business loan for help. However, this could be stressful because typically loans require a down payment or even some type of collateral which your small business may not have.

When you can put a down payment or collateral, the lender is more comfortable qualifying your business. Fortunately, there are plenty of loans available that require no money down for small businesses.

Small Business Loans with No Money Down

It’s important to keep in mind that although there are options to get loans with no money down, it can be challenging to find, and the terms and interest rates won’t be as favorable as if you are putting money down. The following small business loans require no money down.

Term Loans

Term loans do not require a down payment to secure and are the most common type of loans. The money you borrow can be up to the millions and you can use the money for whatever your business needs. If the rest of the application looks appealing to the lender you can be approved without a down payment. Interest rates for this loan will be a bit lower than the others we are going to discuss today. As always, the exact requirements of the term loan will depend upon the type of lender you work with and your business financial profile.

Business Line of Credit

Business lines of credit work similarly to business credit cards; there’s a maximum you can borrow, and you will be charged interest for only the amount you borrow. You can use a business line of credit to purchase inventory, invest in marketing, and for any other business expenses that may arise.

It’s important to note that there are two types of business lines of credit, secure and unsecured. Secured is easier to qualify for but does require a type of collateral or down payment. Unsecured does not require collateral or down payment.

Invoice Financing

Invoice financing, also known as accounts receivable financing, is where you sell your unpaid invoices to cover the lender’s risk. The lender will pay you up to 85% of your unpaid invoices and use the rest to calculate fees until they’re paid off. This option is feasible for those small businesses that have long payment cycles and have cash flow issues since they must wait for their customers’ money. This is an option for small businesses struggling with cash flow issues due to unpaid invoices.

SBA Microloans

SBA microloans up to $50,000 are available for qualifying small businesses. This loan is not for those who are looking for quick funding as the process is long and time consuming. You won’t need a down payment to secure a microloan, but you will need some form of collateral to qualify. This type of loan may be difficult to qualify for if you have unstable finances. 

Equipment Loans

If you are buying equipment, then an equipment loan is your best bet. If you are approved, the equipment you are buying is used as collateral in case your business defaults. This makes it less risk for lenders so it’s generally easier for borrowers to get approved for this type of loan as opposed to the others. 

There are times where the financing company will give you 80% of the cash you need for the equipment and the remaining will act as a down payment.

No-Fee Business Credit Card

If for some reason you don’t qualify for any of the options listed above, a business credit card is another option that requires no down payment. A no-fee business credit card is best to fund your business’s smaller everyday purchases while earning rewards such as cash back or miles.

A business credit card is the easiest to qualify for, but it does have a minimum credit score requirement depending on the type of card you are applying for. Also, you need to sign a personal liability in the case you are unable to make the credit card monthly payments. If you have a poor personal credit score, it will not be a favorable option for you because the annual percentage rate will be high.

In order to choose the best option for you, it’s important to assess your business’ needs. If you need to purchase new equipment, consider looking into equipment financing. If you need money for working capital in between payments, invoice financing is the best option for you. Even though lenders prefer down payment or collateral, you can still get a business loan without it.