As a small business, you need to make money in order to grow. Unfortunately, cash flow can usually wind down to a trickle if you don’t have enough business funds to keep it afloat. And although loans may be your best bet in this situation, you might be worried about having to pay it back in a certain amount of time.
Does this sound like you? If so, then don’t panic.
There’s another way to stay financially afloat, while trying to make money off your hard work. External financing can be as easy as getting a small loan to help you move your business forward – loans that are called “microloans.”
With that said, here’s what you need to know about microloans, should you decide to pursue this type of funding for your business.
What Is a Microloan?
“A microloan – also known as microlending, or microcredit–is funding for entrepreneurs and business owners in the form of small loans,” says Theresa Lightfoot, a financial expert at Writinity and Last Minute Writing. “These loans allow them to, at the very least, get their idea off the ground, or to expand their business. It’s no different than a small business loan, because according to the U.S. Small Business Administration, a loan under $50,000 is classified as a microloan.”
But what about traditional loans?
“Traditional lenders tend to charge you with interest and other fees, whereas microloans are more interested in investing in you and your ideas, rather than making money off of you,” adds Lightfoot. “Therefore, helping the entrepreneur make his or her idea a reality is the central mission of microlending, especially those who are within disadvantaged communities. And the best part is that microlending bodies can provide coaching and training to help business owners build a strong foundation for their companies. This ensures that borrowers can pay back the loans.”
How Does It Work?
Regardless of your credit–whether it’s good, bad, or there’s no credit at all–you might still qualify for a microloan. In fact, the purpose of microloans is to help communities that are often excluded from traditional funding options, which include minorities, women, freelancers and sole proprietors, consultants, veterans, and new startups with only a handful of employees.
Although each micro lender will have different requirements and loan terms, all micro lenders will evaluate applicants’ credit scores, business revenue, other sources of income, business plan, and how much time you’ve been in business to see if you qualify. So, whether you’re looking to have microloans to start your business, buy supply, cover payroll or employee training costs, etc., you can take comfort in the fact that microloans have low-interest rates, flexible requirements, and longer payback periods.
Resources like Credit.com can help you find the right loan, depending on your current situation and or business venture. And as always, quotes are free, with no obligation.
How to Find a Certified Micro Lender
“Tons of microlending companies are available at your convenience online,” says Lola Heath, a business writer at Draft Beyond and Research Papers UK. “You can find a list of certified micro lenders, and pick one that’s right for you, regardless of location and how good their quote is. You can also go to the AEO website, where you’ll find micro lenders listed by state. And as you do your research, it’s important to know that each lender will have their own criteria and procedures. So, don’t be discouraged if one or two lenders don’t approve you, because there’s always a different lender you can go to.”
Conclusion
Nowadays, it’s not surprising to see that small businesses and entrepreneurs are more apt in choosing microloans over traditional. Now, even freelancers are taking up the prospect of having more freedom with microloans, because of their leniency and flexible qualifications. This is especially true, because unlike traditional and proper banks, microloans are more willing to take risks with small businesses, and they’re easier to obtain regardless of credit.
