What are Microloans?
Microloans, are small, short term loans extended to entrepreneurs and smal busines owners to help kickstart the company’s growth. The amount of the average microloan ranges between $500 and $50,000 in the United States. One particular type of microloan is the SBA loan, which is a business loan guaranteed by the Small Busines Administration with interest rates starting at 7.75%.
Additionally, microlending (also known a microcredit or microfinance) can also refer to the extension of small loans to entrepreneurs in developing countries to help reduce poverty and spur economic development. In this guide we’ll focus on microloans in the United States. For international microlending visit this article.
Are you eligible for a microloan?
Technically almost every registered business can qualify for some sort of microloan, but the eligibility requirements depend on the lender.
Typically microloans programs are designed for businesses with little to no revenue or traction. Additionally, many lenders give loans to particular groups of people, such as veterans, women, minority business owners, or low-income individuals.
The SB microloan require an extensive questionaire, and has restrictions on what types of businesses can apply and what the capital can be used for. For example, businesses that engage in lending, political activities, or religious teaching are not eligible for any SBA loan
Is a microloan best for your business?
After you determine if you’re even eligible for a loan, it’s important to consider whether this type of financing is best for your business.
If you’re looking to raise debt capital, your first stop is typically a local bank or credit union. Unfortunately, traditional lenders have shyed away from small business lending and typically require collateral www.carolinapaydayloans.org of some sort.Continue reading