Nowadays, finding ways to fund a small business isn’t as complicated as it used to. There are many different options and alternatives available that can fit our particular needs. In recent years, however, we have seen how microfinancing your small business as an accessible, convenient, and flexible way to fund a startup. As a result, many business owners are opting for microloans to get their companies starting.
Talking about microfinancing your small business can refer to different funding aspects like microloans, micro savings, even microinsurance. Thus, we will focus on the different uses and benefits of microloans. Also, we will go over the process of applying for a microloan.
The market for microfinance has been steadily growing during the last decade. Through microloans or microcredits, many individuals, groups, or entrepreneurs can have access to funds needed to start a new business. According to the SBA, the average microloan is between $35,000 and $50,000. This way, those with bad or not enough credit can support their businesses and become active members of the small business community. Microfinancing also includes the concepts of micro-savings and microinsurance, which we will cover at another time.
The vast majority of investors and lenders do not have specific requirements regarding the use or purpose of microloans. Therefore, entrepreneurs can use these funds for many different functions. However, most business owners tend to use microloans to buy the inventory they need to start operations. Besides, buying, renting, or servicing machines, tends to be another common purpose. Buying office supplies and equipment as well as paying employees’ wages are other examples of common uses for microloans. This is because, typically, these loans are faster to apply for, which means we can start operating our company sooner.
Microfinancing your small business through microloans is a convenient, accessible, and affordable way to start a company. There are certain standards we have to meet when we apply for one, though. The very first step is finding a local microloan provider. This will allow the intermediary to have a better understanding of our actual needs in regard to the local business environment.
Once we have found a local intermediary, we can complete and submit our microloan application. In order to improve our chances of being eligible for a loan, we must take care of some aspects. First, make sure you have a solid and well-developed business plan. Also, prepare the evidence that proves your financial situation and cash flow accordingly. Providing a personal guarantee and any other collateral assets should help you seem much more appropriate for such a loan. After all, the future of your business might depend on starting with the right foot, and microloans can help you achieve this goal.