Microloans For Business Funding
Microloans can be a fantastic method for smaller business owners to receive funding to start up a business. If the business owner only requires a couple of thousand dollars this the ideal option to think about. There are countless people who search for loans for the purpose of business funding that are often not approved due to lack of experience or credit.
Microloans have been backed up by the SBA (Small Business Administration), which makes it easier for certain individuals to obtain a loan for their specific requirements.
Microloans can be compared to other loans; the difference is that the amount allocated is smaller. Many microloans range from about $13,000 and the maximum amount that can be approved will be $35,000. The payment term for these loans generally does not exceed 6 years. However, the payment term will depend on the amount loaned. Either way, microloans is an excellent opportunity for new businesses to obtain the money needed to get a business off the ground. In addition, the payment terms are affordable when compared to larger loans where the premiums become expensive.
The idea of the microloan began to gain popularity from a Dr. Muhammad Yunus, who in the past offered microloans personally to a number of “local” business owners looking to begin their own business. With the help of this man, several individuals in Bangladesh were able to improve their own lives as well as their economy. Certain loans he supplied were as small as $20, and in 2006 he became the winner of a Nobel Peace Prize related to his generous actions.
How To Obtain A Microloan
It is advisable before trying to obtain a microloan for the purpose of business funding, the individual should be sure that this loan is right for his or her purposes. These loans work well for individuals who are running their businesses on low costs and only have one or two employees. If the costs of a startup are excessive this type of loan will be of little assistance. The business entrepreneur should have a business-plan in place that will allow them to discover the amount needed.
It is always advisable to contact the SBA (Small Business Administration) to make inquiries about obtaining a microloan. This institution can provide information on possible grants available for the type of business venture. The SBA has been formed for smaller business owners who are in search of assistance and information on how to run their specific small business. This service is available in nearly every state and the institution deals locally which insures that business owners can receive accurate information. Business owners should first obtain SBA backing which will increase their chances of obtaining a loan.
After receiving this backing, business owners can then approach an investor or local bank to assist with business funding. With SBA backing lending institutions are more willing to approve a loan as the SBA offers a guarantee that they will pay a portion of the loan back if the business owner fails to pay.