Microloans for Your Small Business: Are They the Right Choice?

Microloans for Your Small Business: Are They the Right Choice?

Financing a small business can be a first-time entrepreneur’s biggest challenge. If you’re like many others out there,  it’s difficult to keep investing your own money in the business due to personal bills and unrelated expenses. At the same time, it can also be difficult to qualify for a traditional bank loan without strong cash flow. 

If you’re struggling to obtain funding from traditional financing sources, a microloan might be the answer to getting the working capital that you need to get your business off the ground. Below, we’ll define a microloan if you’re new to the concept, explain how it’s different from other financing options available, and help you determine whether it’s the right loan option for you. 

What are microloans?

In short, microloans are small, short-term loans of up to $50,000 to help small business owners get their companies up and running. Microloans are different from traditional small business loans in three big ways: the reason behind the loan, the people involved in the loan, and the size of the loans. 

Microloans are geared toward entrepreneurs who might not have access to traditional funding options. The more mission-based microlenders often help support specific groups, like women and minorities, while other microlenders help freelancers or new startups with only a few employees.

This type of funding is also different because it’s issued by specific entities rather than banks or other financial institutions. Whereas big banks are often behind large loan amounts that carry a fixed monthly payment, microloans are typically smaller loan amounts offered by nonprofit organizations, the government, or existing businesses specializing in this type of lending. In fact, there are more than 10,000 microfinance institutions in the world today.

Microloans can benefit those in a range of fields, from brick-and-mortar retail shops, restaurants, firms offering various services, and manufacturing outfits to consultants, freelancers, and those in skilled trades. Small businesses can also use microloans for various activities, including covering payroll or purchasing new inventory and equipment.

Pros and Cons of Microloans

Microloans can be a good resource for some new businesses, but that doesn’t mean they’re right for everyone. To help you assess whether a microloan is the right choice for you, here’s a list of pros and cons to review:



Requirements for Microloans

The requirements for microloans can vary depending on the lender, so be sure to review their list of qualifications before applying for the loan. That being said, there are a few things a business owner should prepare before applying for a microloan, including:

Microloans for Small Businesses

There are a number of microloan lenders for small business owners. Here are a few microlenders that you might want to consider:

Find Finance Resources for Your Small Business

If you’ve been turned away by traditional bank lenders or prefer alternative lending sources, it’s good to know that you have options. Microlending could be the best choice for your new business. A quick cash infusion from these smaller loans could be all you need to get your company off the ground. Even if you don’t have a credit history — or even if you have bad credit — many microloan lenders will still offer the financial support you need to pursue your passions.

As a new business owner, you’ll need all the resources you can get as you form, launch, manage, and build your company. ZenBusiness offers all the tools you need at any stage of growth. Let us help turn your dreams into reality as you start, run, and grow your business.

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