How to get a business loan with no money down

Yes, you can get business financing with no down payment. Revenue-based working capital, business lines of credit, invoice factoring and many microloans don't ask for money upfront, because they fund the operation of the business rather than the purchase of an asset. Where a down payment almost always shows up is when you buy a business, a building or expensive equipment with weak credit.

The key is knowing what kind of money you need. If it's for payroll, inventory, materials or a cash flow gap, there are several no-money-down routes. If it's for an expensive asset, there are ways to shrink or avoid your contribution, and it pays to know them before you negotiate.

Down payment, collateral and equity injection are different things

Many owners use these terms interchangeably, and that causes confusion when comparing offers:

• Down payment. The cash you put in when you buy something with financing. For example, if a truck costs $60,000 and the lender finances $48,000, your down payment is the remaining $12,000.
• Collateral. An asset that backs the debt and that the lender can take if you don't pay: the equipment, real estate, your receivables.
• Equity injection. What banks and the SBA call your own investment in the project, especially when buying or starting a business.
• Personal guarantee. Your promise to pay with your personal assets if the business can't. It's not an upfront payment, but it is a risk.

A loan can require no down payment and still require collateral or a personal guarantee. So when someone says "no money down," also ask what secures the debt. For typical down payment expectations when one is required, see our guide to business loan down payments.

Financing that usually requires no down payment

These products fund the business's operation, not the purchase of a specific asset, so there's no purchase price you have to cover a slice of:

• Revenue-based working capital. The funder reviews your deposits and offers an amount you can use for whatever the business needs. Merchant Fund Express, our recommended funder, works this way: $5,000 to $5,000,000, credit from FICO 500, decisions often in 2 to 4 hours and, in most cases, no collateral required.
• Business line of credit. You draw what you need up to a limit and pay interest only on what you use. Banks usually want history and sometimes collateral; online lines tend to be more flexible.
• Invoice factoring. You get paid early on invoices your customers owe you. The invoices are the backing; you don't put cash in.
• Small SBA loans. The SBA doesn't require collateral on 7(a) loans of $50,000 or less. That's not the same as requiring no equity, but for small working capital loans there's usually no down payment.
• Microloans. Community organizations that make SBA microloans lend up to $50,000 for working capital, inventory or equipment, with their own requirements.

When you'll almost always be asked to put money in

In some situations, 100% financing is rare. Knowing that up front saves you time:

The exact percentage the SBA or a bank asks for varies by deal type and current policy. Always get the number in writing before you go further.

How to buy equipment with little or nothing down

Equipment is where owners ask most about no-money-down options. These are the most common routes:

1. 100% equipment financing. Some funders cover the full price when your credit and sales are solid, because the equipment secures the debt. Ask whether taxes, shipping and installation are included; they're sometimes left out.
2. Leasing. Often you pay only the first month or a deposit instead of a large down payment. At the end you can return, renew or buy the equipment, depending on the contract. Compare the details in our guide to leasing and equipment financing with no down payment.
3. Vendor financing. Some dealers offer in-house plans with little or nothing upfront, especially during promotions.
4. Use working capital. If the equipment is cheap relative to your sales, it can make sense to buy it with working capital and skip a separate equipment application.
5. Pledge equipment you already own. If you own paid-off machinery, some funders accept it as backing and lower or remove the down payment on the new equipment.

If you're asked for money you don't have

Being asked for an equity injection doesn't always mean it all has to come from your pocket. These are honest alternatives to negotiate:

• Seller financing when buying a business. The current owner agrees to let you pay part of the price over time. It cuts what you need right away and shows the bank that the seller believes in the business.
• An investor partner. Someone puts in part of the contribution in exchange for a share of the business. Put everything in writing with an attorney.
• Shrink the project. Starting with a smaller space or used equipment can lower the contribution you need.
• Split the purchase into phases. Essential equipment first, the rest once the business is generating sales.
• Save for a few months with a clear target. It's not exciting, but showing up with savings to contribute usually gets better terms.

Be careful about taking an expensive loan to cover the down payment on another one. Beyond stacking payments, some programs don't allow your contribution to come from borrowed money. Ask before you do it.

Examples: which no-money-down route fits which business

These examples are illustrative, to show how this plays out in real situations. Yours may differ:

• An auto repair shop that needs parts for several jobs at once. The money is for operations, not an asset. Revenue-based working capital or a line of credit, no down payment.
• A commercial cleaning company whose clients pay in 45 days. The problem is waiting to get paid. Factoring those invoices, no money upfront.
• A landscaper who wants a second commercial mower. With good credit, 100% equipment financing or a lease with a deposit. With weak credit, expect a request for some money down, or use working capital if the mower isn't too expensive.
• Someone who wants to buy the taqueria where they work. Here there will almost certainly be an equity contribution. The route is to negotiate seller financing for part and borrow the rest.
• A bakery remodeling its rented space. There's no asset to secure the debt; working capital or a term loan with no down payment, depending on its sales.

In every case, check what assets end up pledged. Our ranking of the best no-collateral business loans covers options that don't tie up your property.

How to apply for no-money-down financing, step by step

1. Define the use of funds. Working capital, equipment, inventory or buying a business. The use decides which options apply.
2. Review your deposits. With no-money-down financing, your sales are your best backing. Deposit everything into the business account and avoid negative days.
3. Gather your paperwork: recent bank statements, ID, business details and, for equipment, the quote.
4. Ask every funder three questions: do you require a down payment, do you require collateral, and do you require a personal guarantee?
5. Compare the total cost in writing, not just the payment. With nothing down, the financed amount is larger, and that shows up in the cost.
6. Read the full contract before you sign, especially the guarantee section.

If your business already has steady sales, you can apply with Merchant Fund Express for free with no impact to your credit. It accepts applicants with an ITIN (no SSN needed) and offers Spanish-speaking support. Prefer Spanish? Leer en español.