Many small business owners have one major problem — access to substantial capital to keep their business running. According to Small Business Administration, 20% of small businesses fail in their first year due to a lack of funding and capital.
If you’re a small business owner, you likely understand what it is to be without funding for your business. Thankfully, a solution can help your business stay afloat even in business emergencies.
Obtaining microloans is a great way to get funding for your business. This blog post will discuss how this option can benefit and boost your small business and how to apply to one.
What Is Microcredit and How Does It Work for Small Businesses Owners and Entrepreneurs?
Microcredit is when lenders give small amounts of money at low interest to small companies. It’s generally a good option for people who don’t have a consistently high income, credit history, or collateral.
Microcredit is excellent for entrepreneurs and small businesses that find it challenging to get the financial support they need to start an idea or run a business from traditional financial institutions.
Most microcredit loans do not come with a written contract, and borrowers are expected to pay back almost immediately. However, as you pay back, you can build your credit history, qualifying you to obtain more loans.
Benefits of Having a Microcredit Loan to Help Grow Your Business
Microcredit benefits businesses in several ways. You get access to small-sized loans despite having little or no assets. Many banks will not give small business owners loans if they have no collateral because of the risks involved.
You’re also likely to get approval for a microcredit loan faster than traditional loans. The process is less complicated, making it easy for everyone to understand the loan terms, unlike the long processes and documentation associated with bank loans.
Microcredit loans have fewer eligibility requirements, so you have a higher chance of getting a loan than traditional loan applications.
Great Ways to Use and Take Advantage of a Microloan In Your Business
You can use microloans to empower your business in many ways. These are a few popular ways people use microloans for their business:
You may decide to use a microcredit loan as capital to get a business started, pay employee salaries, pay for extra labor, or purchase goods that you use to run the business. It is a good idea if the company is just starting and does not have enough customers yet to generate income.
- Inventory and Supplies
Sometimes businesses may run out of funds to purchase inventory and supplies. Microloans are a good funding option in this instance. You can use it to buy the items you need to provide services or products to customers and then repay the loan after customers have paid for the goods and services.
- Furniture, Equipment, and Machinery
Microcredit is also helpful for buying furniture and equipment for the business. These are essential aspects of a company that keeps customers satisfied and employees productive—usually, equipment and machinery help produce items that will bring in profit for the business.
The furniture keeps customers happy and satisfied, which is an excellent way to make them loyal or refer your business to bring in other clients.
How Can You Qualify for These Financing Options?
Different microcredit lenders have specific eligibility requirements and credit requirements. Generally, however, they may evaluate your credit score, business revenue, source of income, business plan, how long you’ve been in business, etc.
Don’t fret about being qualified, many lenders understand that microcredit borrowers may not have excellent credit scores or steady sources of income. They are more flexible than traditional bank eligibility requirements.
Microcredit is a loan option that will save the day when other traditional methods of obtaining a loan have proved unsuccessful. They are specifically available for entrepreneurs or small business owners to ensure that you can fund your business when you’re low on finances. Access microcredit loans today by visiting the link we shared above.