Banks won't lend to startups without three years of growing revenue and profit. They'll demand a personal guarantee on your house and car. Evan Carmichael recommends bootstrapping first, then raising from your network before approaching banks.
Can you get a business loan if you don't have revenue? It's a question that came in from Mo, who's one of my YouTube viewers. Mo's amazing, has a great smile, asks a ton of questions, is always active. So thank you, Mo, and I'd love to answer this question for you. Here's the thing: banks are typically not the best place to go to for funding your business because banks do not take risk. They want to make sure that they're going to get their money back. So if you're just starting up, the bank is not the place to go. If you want to get a small business loan, then absolutely they want to see revenue growth. Not just revenue, they want to see profits. If you have revenue but you're losing money, it's going to be really hard to get a bank loan. They want to see 3 years of traction and growth. So you're going to have to show the last 3 years of your top line revenue and and your bottom line profits, and it better be growing, and it better look good, or they're not gonna say yes to a small business loan. Because it's risky. Because most businesses fail, and they don't wanna be attached to that. They wanna get their money back. They wanna be able to grab onto something in case it doesn't work out. So typically the only way to get a small business loan as a startup is to have a personal guarantee. So that means if you can't pay the loan back from your business, You are on the hook personally. They can take your car, they can take your house, they can take any investments that you have. You are personally on the hook for repaying that loan. If you really need to get money, then as a startup, the best places to get it, first of all, is bootstrap. Don't spend money. I hate spending money till I'm making money. Try to find a way to get it from your customers. Put that money back into your business. It's slower growth, but you're going to be able to make and build a more successful business because you know what you're doing. You're building and you're learning the process as you go through. If that's not working out fast enough for you, then your next best bet is to look at friends and family. Look at people who you know who might be able to invest in your business. And often the people who do it aren't the people who are closest to you. They're not your uncle or your aunt or your parents or your brothers and sisters. It's the people who are in a wider network. Maybe it's somebody you went to high school with. So you gotta spread the word beyond your immediate network. If you need to go get that loan, be prepared to give that personal guarantee, or they're not gonna say yes to you. But again, I hate spending money until I'm making money. So go find a way to hustle, bootstrap, get something of value that you can sell to your customers, and Get money in the door, start building that business up, and then when you're ready to expand, then it's easy to go after a banker or an angel investor or even a venture capitalist if you have bigger dreams because you've shown that it can work on a small scale and now you're really ready to ramp up. Thanks for the question, Moe. Believe. For those of you watching, you like the video, please give it a thumbs up below. It makes me wanna do more for you. And I'd love to hear your questions and your comments below. I'll make a video reply for people who write in. Thank you guys, I'll see you soon.
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