A micro loan is a small business financing option that’s available to those with below-average credit. This type of business funding can be a great solution for women, minorities, veterans and others who have struggled to qualify for traditional bank loans.
Many of these lenders are targeted to specific communities and prioritize borrowers who may have a hard time qualifying for other types of business loans. These lenders also often offer additional resources like coaching or management training.
Getting a Microloan
The best way to get a micro loan is to apply through a lender that specifically offers them. There are a number of different lenders that offer microloans, including the Small Business Administration (SBA), community development financial institutions, and specialized lending companies like Kiva. Some of these companies also focus on providing micro loans to minority business owners or other groups that have traditionally been underserved in the banking industry.
If you are looking for a micro loan, it is important to research the requirements of each individual lender. Many of them require a detailed business plan. Others may ask you to submit financial documents, such as bank statements, tax returns, and credit reports. Having these documents in order will help speed up the application process.
In addition, it’s a good idea to boost your credit score before applying for a 소액대출. While most microlenders don’t rely on credit scores in their lending decisions, having an excellent score can help make your application more appealing. Similarly, you should clear up any outstanding debts or dispute errors on your credit report before applying for a microloan. This will help you avoid any surprise credit checks that could disqualify you from receiving the funds. You can also consider alternative options to a microloan, such as a business line of credit.
Benefits of Microloans
Microloans are great for small businesses that need short bursts of capital to meet immediate needs or swallow seasonal expenses. They can also be used to help establish business credit and are generally a much faster funding source than traditional loans. Additionally, most lenders look at the “big picture” of a business when deciding whether to provide a loan rather than simply reviewing the credit score of the business owner.
Many microlenders have specific requirements for borrowers such as requiring that the borrower be in business for at least two years or ensuring that the business is profitable. Some have special preferences for borrowers in underdeveloped communities or countries while others are focused on providing business owners with the tools and education they need to be successful.
For example, the microloan lender Grameen America works with groups of women to provide financing and provides training on savings and credit building. The organization also reports microloan repayments to Experian, which can help borrowers improve their credit scores and qualify for more financing.
Likewise, the 예금계산기 lending platform Kiva connects borrowers with potential lenders around the world. The organization also helps educate borrowers on how to run their own businesses and provides them with mentors who can offer advice and support. Lastly, some of the larger microlenders work directly with the U.S. government to make available business financing for underserved areas.
Disadvantages of Microloans
While microloans can be beneficial for business owners who have been turned down by banks or do not qualify for traditional loans, they aren’t without their disadvantages. For example, the high interest rates associated with some micro loans can be expensive for those taking out the funds. Some critics compare the loan rates to those of loan sharks and say that the high costs defeat the purpose of the microlending movement, which is supposed to combat poverty rather than profit from it.
Microloans also often have shorter repayment terms than traditional loans. This can lead to financial hardship if the borrower doesn’t have enough income to pay back the principal and interest. Furthermore, microloans may come with other conditions, such as the requirement that borrowers attend workshops on business plans, marketing and money management. These requirements can take up time, which may reduce the amount of time that a business owner has to run their business.
Despite these drawbacks, many people and organizations are still interested in working with microlenders. In addition to Muhammad Yunus’ Grameen Bank, there are a number of peer-to-peer (P2P) lending programs such as Prosper and Lending Club, which have lower overhead than most banking institutions and are able to offer inexpensive loans for small businesses. These programs are proving that not all business financing needs to go through traditional bankers.
Finding a Microlender
There are many options to consider when looking for small business financing, and microloans are one of them. These loans are usually less expensive than traditional loans and have a shorter payback period. Microloans are often provided by nonprofit community organizations or online platforms that connect people who want to lend and those who need funding. Some large financial institutions also offer microloans through their business loan programs, such as the U.S. Small Business Administration (SBA).
If you are interested in a microloan, check to see if there are any available near you. Most lenders will have a list on their website, as well as information about how to apply. Typically, you will need to provide personal and business credit history, as well as bank statements and tax returns. Some microlenders focus on particular groups of entrepreneurs, such as low-income entrepreneurs, women, and minority-owned businesses.
If you are considering a microloan, make sure to compare it with the costs and benefits of other forms of financing, such as merchant cash advances, invoice factoring, equipment financing, or business credit cards. In addition, be sure to understand the terms and conditions of the microloan, including how it will be paid back. Many lenders will require that you have a solid business plan before offering a loan. This will help you avoid costly mistakes and grow your business.