A microloan, a small business loan of up to 50,000 dollars is perfect for new entrepreneurs who don’t need much small business financing in order to hit the ground running. Microloans are also beneficial for existing businesses that just need a little boost to pay for extra equipment or inventory.
Read on for some more information about microloans that will help you decide whether the microloan is right for your small business.
- How much is the loan?The average size for Small Business Administration (SBA) loans is $13,000, but the microloan can range from anywhere between a few thousand dollars to $50,000.
- What are the loan repayment terms?It all depends on how large the loan is, what it will be used for, the entrepreneur’s financial needs, and other requirements that are set by the intermediary lender. The interest rate also depends, but the range is usually between 8 and 13 percent. In general, the maximum repayment term for most microloans is six years.
- How do I apply for a microloan?The application process for a microloan is a little different than the process for a traditional bank loan. In order to apply, you need to collaborate with an SBA-approved intermediary. These intermediaries are usually nonprofit organizations that have experience with lending and providing assistance to entrepreneurs.Biz2Credit (www.biz2credit.com) works with microlenders, such as ACCION, and has helped thousands of aspiring entrepreneurs to gain funding.
- What if I don’t have a stellar credit history?Not to worry. Microloan providers generally do not put as much weight on credit score as do most banks and other lending institutions. This is why the interest rate for microloans can be somewhat higher. But microloan intermediaries still need some assurance that you will indeed repay the loan, so most will require some form of collateral.