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How to Get a Personal Loan with No Proof of Income

How to Get a Personal Loan with No Proof of Income

You need a loan because you need money. You apply for the loan and the bank says that they can't approve you because you can't show that you're earning money.

September 20, 2019
June 4, 2019

5 Creative Ways to Get Funding for Your Small Business

Are you starting or growing a business, but feel stymied by the financial aspects? You're far from alone.   

According to the Small Business Report, a survey of 393 small businesses across the United States, 60 percent of small business owners feel that they lack high-level knowledge of accounting and finance. That may help to explain why 30 percent of small businesses fail because they run out of assets.

How do you avoid being one of them?

Traditional lending is available to some business owners, but big banks approve less than 27 percent of small business loans. Smaller banks typically approve around 50 percent of applications.   

Loans can be rejected for many reasons – too much owner debt, a bad credit history – but the challenge remains the same. If you have to spend money to make money, where do you get it?   

It's time to turn to creative business financing options. Here are five to get you started.

1. Enter a startup competition.

What's better than startup funding? Startup funding combined with instant recognition, street cred, and targeted exposure.

It's easy to see why innovative entrepreneurs enter into startup competitions. First of all, the equity that you get from them often comes without strings, meaning that you won't have to relinquish control of your company in order to get funded.  Also, whether or not you win, you'll get direct feedback from industry insiders.

Finding a competition

From small-town contests sponsored by community associations to six-figure corporate contests, the variety of startup competitions out there is astounding. Don't sign up for the first one you see. Instead, take some time to research competitions that are well-respected and find one that’s a good fit for you. Filter by whatever matters to you, whether it's prize amount, contest location, or networking potential.

Make it count

Even if you enter a no-fee contest that's close to home, competitions are still time investments. To make the most of the experience: 

  • Enter competitions within your niche. Your chances will be better and the feedback you get will be more useful. 
  • Before the competition, reach out to previous winners and judges for tips. 
  • Rehearse your pitch in front of fellow business owners. Ask them to challenge your idea as much as possible. 
  • Treat every conversation on-site as a promising connection. You never know which networking encounter will result in an investment.

2. Negotiate trade credit agreements with vendors.

If you have an existing customer base, you may be able to get funding by borrowing against your supplier costs. It's known as trade credit, and it accounts for as much as 40 percent of the average small business's financing.  

How it works

To get trade credit, you have to persuade your suppliers to let you delay payment. Not all suppliers will do this, so be proactive about choosing vendors that are open to it.   

You'll probably need to present a proposal to any vendor that might offer you trade credit. Be honest and transparent, but emphasize the volume of inventory that you'll need going forward. Doing so will position you as an attractive client. 

Any trade credit offer you get will include a time frame. If you pay in full by that deadline, you get a percentage discount off of your interest. Otherwise, you will have a larger amount due but have longer to pay. Be sure to calculate what your interest rate and total payment will be before you agree.

3. Use a Rollover as Business Startup to draw from your retirement savings.

A Rollover as Business Startup, commonly known as a ROBS, enables you to transfer funds from a 401(k) or IRA to start a business, or buy or invest in an existing company. It's typically a three-step process: 

  1. The aspiring or new business owner sets up a C corporation and new 401(k) for the business.
  2. The owner rolls over his or her existing retirement accounts into the new plan.
  3. Using funds from the new plan, the owner purchases stock in the C corporation. The proceeds become liquid capital for the business. 

Pros and cons

A ROBS doesn't count as withdrawing funds from a retirement account, so you won't have to pay early withdrawal penalties or distribution taxes. And because it isn't a loan, you don't have to worry about losing your business in an effort to repay it. 

You are, however, risking your retirement if you don't recoup those funds in the form of revenue. You're also taking on all of the tax implications of a C corporation as well as the administrative fees involved in the ROBS itself.

4. Offer advance sales.

In the age of crowdfunding, consumers have become accustomed to supporting businesses that are still in development. They find win-win situations in the prospect of supporting a new business owner while simultaneously getting access to a new and innovative product and service.

Pre-sales let you get in on this trend, while also capitalizing on the modern consumer's need for connection with a brand. If you communicate directly to your target market, offering them early access in exchange for a commitment to buy, you can get them to buy in early enough to get you startup funding.

Making it work

For advance sales to generate significant revenue, you need to build up the pre-sale period. Statistics show that 28 percent of all pre-order income happens on the first day of pre-sale, so make sure you advertise it well.

Offer incentives for pre-order so that your investors feel like the VIPs that they are. And remember to keep them in the loop as you head toward launch. You'll need them as brand ambassadors.

5. Sell your home, but stay as a tenant.

In the past, the only way to get your home equity without moving out of your house was to take out a home equity loan or line of credit. For business owners, that can be scary. If you end up not being able to pay back that loan, you could lose your business and your home.

EasyKnock has an alternative. It's called Sell and Stay, and it exists to meet the needs of homeowners who need money but might not qualify as borrowers.

When you participate in the Sell and Stay program, you sell your home to EasyKnock and receive an agreed-upon price based on your built-up equity. But in contrast to a traditional home sale, you don't have to move out. You pay rent to EasyKnock and stay in place until you're ready to repurchase the property or move.

No credit or employment checks

Because Sell and Stay isn't a loan, you don't have to submit proof of income or a credit score. Your equity speaks for you, and it turns into liquid capital to help you get your business moving. It's one of the most creative business funding options, but it's also one of the safest.

The Takeaway

There are many different ways to finance a business, but not all of them are accessible to every buyer. Don't be embarrassed or give up if your personal finances don't qualify you for a loan. After all, your business could be your ticket to financial stability!   

Today, creative financing is more than just a shot in the dark. It's a way of making your innovative ideas work for you, while also getting your stakeholders on board early. Give it a try and see how far it will empower you to go.

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