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Dec 18, 2017 at 09:48 PM

Small Business Financing - What Is A Microloan? And How Can Your Small Business Benefit?

By Alexandra Trujillo
Small Business Financing - What Is A Microloan? And How Can Your Small Business Benefit?

When you’re running a small business, finding funding can be a daunting process. It can be tough to get a bank loan or convince an investor to get on board when your company is small or new. Lots of small businesses need funding but can’t get it from traditional banks or investors. That’s where microloans come in.

What Is A Microloan?

As a business owner, you probably know what a loan is. A microloan is exactly what it sounds like – small loans for small businesses made by designated lenders. In general, microloans are for less than $50,000 and are used to help cover startup costs and other early expenses for small businesses and not-for-profits. Accion’s average loan, for example, is for $10,000. To give some context, the average general small business loan amount given by the SBA in 2015 was more than $370,000. So, a microloan may be a good option if you want to borrow a smaller amount.

Microloan funds are distributed by designated community-based non-profit intermediary lenders. In addition to providing small business financing, many of these lenders also provide management and technical assistance to their clients.

Qualifying For A Microloan

It’s generally easier to qualify for a microloan than for a traditional business loan. The programs are geared toward helping new and small businesses, so the requirements are more flexible. As with traditional loans, the specific eligibility requirements differ from lender to lender – the business you’re in, your track record, the amount of the loan you need, how old your business is, and other factors may all affect your eligibility with a given lender. Microlenders will work with you to learn about you and your goals and take that information into consideration when evaluating your loan application. That’s one of the biggest differences between microlending and traditional lending – it’s about your character as a business person, not just your credit score.


Posted in Small Business Financing.

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