Merchant Growth Ltd. Acquires Lendified Inc. Learn More

Apply Now

How to Finance a Small Business With No Money

investment concept image - new plant sprouting from soil

Many people believe that starting a small business is something that is only possible with small business loans or large lines of credit from traditional financial institutions. But that simply isn’t true. 

Although some businesses still get off the ground that way, many more employ novel and creative ways of finding their funding. There are many examples of small business owners who were able to secure their required capital by being clever, diligent and persistent in pursuing financing solutions. So, let’s get started on what small business financing options are out there, and what you should keep in mind when trying to figure out how to finance a small business with no money. 

What Do You Hope to Accomplish With a Business Loan?

small business innovation research and cash flow projections

Before you even start looking for financing options for your small business, you should first ask yourself several crucial questions that can help you define just what it is you hope to accomplish and what you need to accomplish the goals set out in your business plan. 

These questions will help you clarify your business goals and the type of financial decisions you will have to make in support of your goals. Some of the important questions to ask yourself include:

How much money do you really need to start your business? 

Are you absolutely sure that you need external financing? Also, ask yourself what you can do to minimize this need without compromising your business idea’s chances of success.

Tally up how much of your own money you can use for the business idea. 

The more you can offset your need for financing through your own personal investment, the better, as long as your business idea doesn’t drain your personal funds. 

Examine what non-financial assets you can use for your business for the time being. 

This too can offset your financing and debt accumulation needs. For example, starting a landscaping business and you already have a full-size pickup truck? Use that to start off instead of buying a new one.

Take stock of your overall financial situation and your available lines of credit. 

Ask yourself which sources of financing are likely to be most favorable to your situation. Depending on your personal credit score and small business administration experience, there could be traditional forms of financing that meet your needs. 

As much as possible, figure out if the timing is right. 

Is now the right time to set out on a new business venture? Just because you’re excited about launching a new business doesn’t mean it’s a good idea. Starting a new business takes an immense amount of time, energy and commitment, so be sure that you are up for the challenge. 

If your existing financial situation is stable, you can always postpone until you’ve saved up more of your own startup costs, or until you’ve refined your idea further.

Traditional Sources of Financing

business deal concept image - two men shaking hands with city landscape in background

First, let’s start with the obvious small business financing sources that might be your first rank of accessible options. These aren’t necessarily better, they’re just more likely to be immediately accessible.

Personal Savings

Many successful business people and investors borrow to fund the growth of their fortunes. But avoiding the use of personal assets to protect against the possibility of failure, remains a tested and true way of protecting accumulated wealth. 

If you are prepared to risk your own personal wealth because you believe so strongly in your business idea, using your own personal savings is a great way to minimize your debt and have total control over your new business right from day one. 

Loans From Friends and Family 

Personal loans from family and friends can be a fantastic source of capital simply because they’re more likely to be free of bureaucratic hurdles, delays and strict conditions, always choose them with a grain of caution though. 

You don’t want to ruin your personal relations because of bad debt. Be sure to draw up a specific written agreement for any money you borrow though, and mutually keep track of any debt repaid. Casually borrowing a few hundred bucks might not be a big deal for a handshake agreement, but if you’re asking family and friends for several thousand dollars or more, the details should be taken seriously and put in writing.  

Business Loans

If you want to leave your own savings on standby and your personal circle isn’t swimming in funds for loans, a traditional business loan from a bank, or other financial institution, is another option. 

Most banks tend to be conservative organizations and qualifying for a business bank loan isn’t always easy. However, if you can convince an institution to hand over part of your startup costs, you’re likely to get a tolerable interest rate.

Keep the difference between short-term loans and long-term loans in mind. The former are likely to have higher interest rates but the latter will probably need to be collateralized with business or personal assets. Also remember that your bank will definitely ask for plenty of documentary evidence of solvency and business viability through positive cash flow financial projections, so be sure to do your due diligence and exhaustive research before ever filing a loan application. 

Equity investment

If you want to avoid debt completely and know people who will trust you to succeed with your business, equity investment is a great option. In exchange for an equity stake in your company, you can find investment to help with startup costs. If you’re able to choose this option, remember a couple key things though:

An equity stake means partial ownership. 

If you offer up more than 50%, you effectively lose control of your own business. This is something you need to keep in mind if the people offering to buy in might later want to interfere.

Draw up a very specific contract of equity conditions with your investors. 

Firmly agree on what they receive in exchange for their stake and how much say they will have in business management. Also clarify how assets will be handled if the company fails. It’s wise to consult with a business contract lawyer, if you end up going this route. 

Alternative Sources of Financing

three women in business meeting

Not all sources of small business financing need to be personal, equity or bank-based. Excellent alternatives also exist if you creatively look for financing. Here are some excellent options that might work even better than traditional choices.

Government Programs

Government funding is usually a form of loan financing with flexible interest rates and repayment schedules. It’s possible to find small business funds from the government but remember that they’re not common. In Canada, a very small minority of businesses manage to pay for themselves with government funds.

The government does however offer helpful programs and in some cases might even be willing to underwrite loans from private banking institutions. The Canada Small Business Financing Program is one example of a resource.

Venture Capital Firms & Angel Investors

Most people associate venture capitalists with huge funding rounds for the next great unicorn tech startup, but the truth is a wide range of start up companies raise money from venture capital (VC) firms. 

VC funding and angel investments are basically a form of equity funding, because you will be handing over a stake in your small business, so read the fine print if you can secure it. If you’re creative and diligent enough, there are venture capital programs out there for small businesses that aren’t looking to be the next Google. Keep in mind, though, that VC funding is usually technology business oriented.

Online Lenders 

Finally, don’t forget about the enormous potential of online lending services. These non-traditional digital lending platforms can offer a very flexible and much more accessible range of lending options for your small business financing needs.

Lendified, for example, offers simple, rapid online qualifications and funding for small business loan requests of anywhere from $5,000 to $150,000 at highly competitive business loan interest rates

They also serve a broad, flexible range of industries. But more importantly, they can be much more flexible than a conservative, traditional bank when it comes to your financing needs and application process.

Lendified – Small Business Loan Solutions, Simplified

Lendified starts from the perspective that small Canadian companies should be treated better, centered on the belief that business owners should be able to get fast and straightforward small business loans without overpaying. 

At Lendified, their online application process only takes a few minutes to complete, allowing you to instantly pre-qualify online and potentially receive up to $150,000 in financing within 48 hours. Ready to take your business to the next level? Apply today!

Enjoy this article? Don’t forget to share.

Share on facebook
Share on twitter
Share on linkedin

About the Author



Lendified is Canada's premier online lender for small businesses. The company was founded by former bank executives dedicated to provide businesses with fast, easy, and affordable financing. The Lendified team regularly produces blogs and guides to help small business owners succeed.

Comments are closed here.