With no revenue yet, what is there to lend against?

With no deposits, an entire category of financing is closed and no amount of persistence opens it. Revenue-based financing, merchant cash advances, deposit-sized working capital products and most non-bank lines of credit all compute their offer from money that has already moved through your account. Zero times any multiple is zero.

What remains is four routes. Each is real, each has a specific test, and none of them is underwritten on the business.

Route one: a specific asset

Equipment financing is the most accessible pre-revenue product because the lender's recovery comes from the machine rather than from you. The test is whether the asset is identifiable, titled or serial-numbered, resaleable, and worth something at auction in two years.

Expect a personal guarantee. Expect the down payment to be larger for a business with no history. Expect soft costs — delivery, installation, training, tax — to be partly or wholly excluded, which means the cash you need is more than the gap in the advance rate suggests.

Route two: a specific order

Purchase order financing funds the cost of fulfilling a confirmed order from a creditworthy buyer. The underwriting is about the buyer, the supplier and the transaction, not about you.

That residual is the reason most pre-revenue purchase order deals fail. The owner sees 150,000 of order value and 75,600 of financing and assumes the deal is covered. It is not. Work out the gap first, then decide whether the order is financeable.

The order also has to be genuine: a signed purchase order, not a letter of intent, from a buyer whose credit stands up, for goods rather than for your labour, with no unusual cancellation or inspection rights.

Route three: your personal balance sheet

Personally guaranteed credit — cards, personal instalment credit, a home equity facility — is available to a pre-revenue business owner because none of it is underwritten on the business. Its cost is honest and worth stating: the business builds no credit file from it, the debt is entirely yours, and if the business does not work the debt still exists.

This is the most commonly used route and the one with the least analysis applied to it. Before using it, compute the total monthly obligation across everything you would draw, and ask whether you could service it from personal income alone for eighteen months. If the answer is no, you are betting the personal balance sheet on a projection.

Route four: a plan, an injection and a guarantee

SBA-backed lending is the only mainstream route that finances a genuine start-up on its projections. It is not easy and it is not fast, and it is not free of the requirements above.

The guarantee rule applies regardless: 13 CFR 120.160 provides that "holders of at least a 20 percent ownership interest generally must guarantee the loan", and the same section notes SBA requires hazard insurance for 7(a) loans greater than 500,000 on all collateral. The eligibility exclusions in 13 CFR 120.110 apply too — including non-profits, passive businesses, and businesses whose owners caused a prior loss to the government.

Also worth knowing: SBA's microloan programme makes loans of up to 50,000 through non-profit community-based intermediaries, with an average of about 13,000, usable for working capital, inventory, supplies, furniture, fixtures, machinery and equipment — but not to pay existing debts or to buy real estate.

The decision procedure

1. Write down what the money buys. If it buys an identifiable asset, start with route one. If it fulfils a confirmed order, route two. If it is general working capital with nothing to secure it, you are in routes three and four only.
2. Compute what you can contribute in cash. Every route requires something. The amount you can put in determines which routes are open before any lender is involved.
3. Test the personal route against eighteen months of your own income. If personal income cannot service it, the route is a bet, not a plan.
4. If you are going the SBA route, start earlier than you think. Projections, a business plan, collateral, injection evidence and the guarantee all take preparation, and the process is not quick.
5. Open the business bank account now. Every day of deposit history is an asset. In twelve months the entire product set changes because of what accumulates in that account.

What to have ready

A written plan with monthly projections for two years, and the assumptions behind the revenue line written down separately so they can be challenged. Evidence of your injection, seasoned and traceable — a deposit that appeared last week from an unexplained source will be questioned. Your personal financial statement and two years of personal tax returns. Any signed contract, order or letter of intent from a customer, because one real commitment changes the conversation more than any amount of forecasting. Quotes for the equipment, with model and serial numbers where available.

What to refuse

Refuse any product that claims to advance against projected revenue on a pre-revenue business. Nothing legitimate prices off revenue that does not exist, and the products that pretend to are pricing off your guarantee while calling it something else.

Refuse to pay an upfront fee for a funding commitment. And refuse to take a purchase order facility without first working out, on paper, where the uncovered portion of the fulfilment cost is coming from.