For small businesses it may seem like no matter what you do, you can never find the money you need to keep your cash flow positive and run a successful business. Acquiring working capital is a must for any business and if you are struggling to find this working capital, you may be dipping into your personal finances to run the business. The good news is there are some loans and lenders out there that can help. One great option you have is to consider a micro loan.
A micro loan is a short-term loan that will provide you with working capital. These loans are generally offered to companies that have little or no business credit because they are new or start-up companies. With a micro loan, you can borrow up to $35,000 and use the money as you need. Typically micro loans are used to help acquire working capital, machinery and equipment, supplies, inventory, and many other things your business needs just to operate on a day-to-day basis.
When you apply for a micro loan, you need to provide the lender with some type of collateral to secure the loan. Depending upon the length of time you have been in business, the loan can last anywhere from 3-6 years and you will need to allow the lender to look into your business and personal financial situation.
Lenders need collateral to reduce their risk. They usually ask for your home or another type of real estate that can dramatically reduce the risk of the micro loan and put it back on you instead of them. Once you have been able to prove yourself worthy of borrowing and repaying money, the lender may be able to approve you for a larger loan amount and help you acquire additional working capital.
A micro loan is offered through approved SBA lenders. Since you are working with the SBA to acquire the financing, you should expect some additional steps. You will need to fulfill are training requirement for the SBA and you may also need to provide them with additional information about how your business will benefit the community.
The SBA likes to offer money to companies that just don't acquire large amounts of money; they want to see a company that provides jobs and community outreach programs. As you prove to the SBA that your business is worthy of their loans, you will have an easier time acquiring the micro loan.
One benefit to micro loans compared to traditional loans is that they may be easier to acquire depending upon the business structure and type you have established. You do need to be within the community boundaries of the SBA lender in order to acquire the funds necessary to operate your business. If you are not within their lending location, you won't be able to acquire micro loans for your small business.
What happens if you cannot apply for micro loans based on your business structure or location? Your next option is to seek the help of commercial lenders. These lenders can offer you money based on your business and personal credit rating along with some type of guarantee or collateral for the loan. They may work directly with the SBA or they may be run by private investors. Online lenders are usually easier to work with than your local lenders so make sure you seek out approval from multiple lenders when you are looking into micro loans, small business lines of credit, credit cards, personal loans, or any type of small business financing. Compare the interest rate, loan amount, and repayment terms in order to acquire the best loan option for your small business.
Corporate Credit Concepts specializes in micro loan. For more information about micro loan and how it might benefit your business, please CLICK HERE for a free phone consultation.