Why Micro Loans Could Be The Answer to Many Small Business Owners Financing Needs

Small business owners, if you have never considered accessing a Micro Loan, you might want to take a look at this viable financing option. Some of you might think that these types of loans are used only in Third World countries. Perhaps you have heard of lending sites such as Kiva dot org, which primarily finances individuals living in countries other than the United States who are starting their own businesses.

Micro Loan financing is one of the best small business financing options available in today’s tight lending climate. This type of financing has been around for many years. Micro Lenders have finance entrepreneurs to the tune of billions of dollars worldwide. There are many other financing options available, but this type of financing has survived the recent financial storm and continues to grow exponentially.

To know if a this financing solution is a good fit for you, first, determine if a small loan amount is adequate for your business. Next, consider the criteria you must meet to be approved for the loan. There are many types of Micro Lenders and they all have different processes in place to either approve or decline your loan request

The answers to the questions below will help to determine if a Micro Loan is right for you:

Why should I use a Micro Loan? Large numbers of loan requests have continued to be approved since the financial crisis hit in 2008. Prior to the economic downturn, lenders would typically take two to three weeks to approve a loan request. Since 2010, traditional loan approvals have taken as long as 10 weeks or more. Many of these loans are now being approved in 6 to 8 weeks. This time-line is, of course, based on factors that must be taken into consideration on a per client basis.

Where do I access a Micro Loan? These loans are available through local, regional, national, and international sources. These sources have their own guidelines for approving loans. Some of these lenders are privately held “for-profit” companies, while others are nonprofit or not-for-profit organizations.

What do I need to access a Micro Loan? The lender will require such documents as your credit report, itemized Use of Funds list, cash flow statements, bank statements, and any other document the lender deems necessary for them to feel comfortable in approving your loan request.

How do I qualify for a Micro Loan? You will qualify for a loan based on the requirements of the Micro Loan lender you use. These lenders will request enough documentation, collateral, and other information to make them comfortable with the risk they are taking to loan you money.

Does my type of business fit this loan option? Each lender sets their industry specific requirements. You’ll need to determine if the source you’re working with will finance your type of business. If you don’t know your industry category, check the NAICS codes system or North American Industry Classification System at Census dot gov.

Many of you may have tried unsuccessfully to get loans from traditional financing sources such as banks. Perhaps your lender did not explain clearly why you failed to qualify for a business loan. Maybe you did not prepare well for traditional financing. For example, if your credit score was too low, or you didn’t have sufficient collateral to offset the risk associated with the loan amount you requested.

If this is the case, a Micro Loan could potentially improve your financial situation. This loan option is a great way to get your business moving quickly. You can access this type of financing based on a number of factors.

Factors to Consider for such a loan are:

Start-ups less than 2 years in business – $15,000 to $25,000 loans available

Seasoned businesses more than 2 years in business – $35,000 to $50,000 loans available

Loans use available collateral such as equipment, vehicles, jewelry, etc.

Loan approval time-line – 6 weeks to 10 weeks or more per lender

Some lenders lend nationwide, while others finance regionally or locally

Types of industries – All types included with restrictions in the construction and medical industries

If Micro-Loan financing fits your small business needs, then by all means use it to grow your business or help stabilize it. Remember, it’s a loan option you can use and reuse in shorter periods of time when compared to repaying a loan for a larger amount. Be sure to prepare effectively for this or any other financing option so you can qualify and get the working capital you need.

How to Choose the Right Business Loan

Unlike fast loans, business loans can be something that are often long term, so the pressure is on to get it right. It can be difficult to find the right loan when there are so many on the market too. Here, we’ve listed some of the main points to consider when choosing the right loan for your business:

What are your needs-The first thing you should consider is what you need from your business loan. Do you need the money to be ready when you need it, or upfront? How much will you need? What is the type of security you want to provide? Will it be residential or do you want to go with a loan that does not require going through this process?

Do your research- It’s a good idea to start by looking on the Internet and explore a range of loan options. Read the fine print and make yourself familiar with all the details. Failing to do this can lead to disaster. Know the terminology and what you are getting yourself into, that way you will be best equipped for making the right decision on the best loan for your business.

What type of loan do you require- There are many different types of business loans that are specifically tailored to the needs of the business owner. Some of these include:

Start up financing: If you are starting up a business there are loans that are specifically designed for this. If this is the type of loan you are after it’s a good idea to go with a lender who specialises in these types of loans in order to get the best deal available.

Business growth financing: New businesses are always growing at a steady pace. Business growth financing is a good option is you are needing a loan to help you expand your business quickly to meet customer demands.

Motor vehicle business loan: The motor vehicle business loan is a good option if you need a loan to assist with the growing transport requirements of your business.

Inventory financing: Inventory financing is all about helping you to meet the demand of your product for your customers. This type of loan will help you get your inventory up, to meet customer requirements.

Business property loan: If you want to purchase a property to conduct business, a business property loan is the best option, helping you to get expert advice on purchasing the right property, and with all the loan options you require.

Finance for equipment and plant tools: You may have to purchase or lease a large piece of equipment to be used in production and a loan specifically for equipment and plant tools is ideal for this.

General business loans: Of course, you may just need a loan to help assist with tax, wages, bills and other things not listed above and of course there are a great number of loans suited for this available on the market.

There are many different types of business loans. Some are similar to cash loans in that they can be arranged fast when you need to pay things like upcoming bills and wages. There are also other types of business loans that require a lot more time in application and can be for much larger sums of money, it really just depends on what you want the business loan for.

I hope our tips and explanation on how to choose the right business loan to suit your needs has given you some insight into how to go about choosing the right loan to suit the current needs of your business.