Business Loans with No Business Plan

Businesses looking for a business loan without having some form of a business plan will find they have few options at funding. There are however, three sources and programs that require less documentation than loans from the SBA or large national commercial lenders.  You'll need to start local, look for modified business loan programs, and when all else fails there is hard money.

Start Local

You'll have to start local, with your neighborhood savings and loan, credit unions, or family banks.  These lenders often know the local businesses well and are part of civic organizations like the chamber of commerce.  They interact with local business owners on a day to day basis, and they also use the products of the local businesses as well.

In the absence of a business plan, local lenders will rely more heavily on the credit of the business. This means a closer look at the accounts receivable and payable reports, as well as profit and loss statements and balance sheet. With a solid balance sheet and good net worth, it is likely a business can obtain a good loan or line of credit without having to show a business plan.  

The Modified Business Loan

If the company is younger and business credit has not yet been established, the lender will rely very heavily on the personal credit of the business owner. In some cases, lenders will offer a modified business loan, which is a loan that carries the personal guaranty of the business owner, but made in the name of the business.  

Modified business loans and lines of credit keep the money available for business purposes, but should the business default on its obligation the bank has the ability to collect the debt from the business owner personally. That may mean having to offer personal security, such as the business owner's house or car, as collateral for their business loan. This presents certain risks for the business owner in the event of a business failure or bankruptcy that extends beyond the business. However, many times, this may be the only option for a startup that has neither deep pockets, nor a business plan on which to attract angel funding.

Private Money and Hard Money Lenders

Private or hard money loans are asset based loans from lenders. The hard money loans will carry higher rates of interest than loans from local lenders or modified business loans. Typically, a borrower can expect to pay between 12-20% interest per year on a hard money loan.  

Borrowers can also expect to pay higher origination fees and possibly fees to exit or prepay the loan as well. The business will need to put up some type of collateral like real estate, business equipment or other personal property from the borrower. These loans are offered at a low loan to value ratio, but are sometimes the only option for the borrower who has neither good credit nor business documentation.