Micro Loans

The SBA has been in business to help small business owners since 1992. They provide a number of loans to small businesses including micro loans. The micro loans offered by the SBA are provided to new and existing borrowers and over $112 million has been lent by the SBA through their micro loan program.

What can you use micro loans for?

Like any type of financing you acquire, there is literally no limit to what you can do with the funds you acquire. As long as the money is use for small business purposes, you can spend it according to your own discretion. Here are some of the commonly purchased things that small businesses owners use the funds for:

• Working capital
• Inventory
• Raw goods
• Office supplies and necessary operating supplies
• Furniture
• Equipment
• Machinery

What is the interest rate like on micro loans?

Traditional loans can have high interest rates but the interest rate you are charged on micro loans are typically higher. Depending upon the intermediary you are working with, the interest rate can be reduced but it is up to your business credit and financial statements to reduce your risk to the lender.

Why choose micro loans?

No matter what type of business you are starting or expanding, traditional lenders are usually quite difficult to work with. If you want to obtain the money without all the hassle, you need micro loans. Micro loans are easy to borrow and they are great for businesses looking to acquire smaller loans. The biggest problem you will face lies with the intermediary. The SBA loan intermediaries have discretion who they lend the money to. They have a nonprofit distribution list and if you aren't in their area, you may not be eligible for micro loans.

How much money can I borrow?

When you apply for micro loans you can expect to acquire up to $35,000. Most of the loans average around $10K as this is just enough money to help your business without posing too much risk to the intermediary. Depending upon your small business needs and the loan terms, you generally need to repay the funds in about 42 months or less. There are special circumstances when the loan lasts 6 years but this is extremely rare.

How do I acquire a micro loan?

If you would like to apply for a micro loan, you must first find an intermediary that has the money you need. Then you need to follow some simple steps to convince them why they need to offer your small business the funds:

1. Explain if you have a new or existing business. Provide the lender with a business plan that clearly explains your business, products, services, and how it will benefit the community.
2. How much money do you need and where do you plan to use it? Prepare a checklist of all the items you need to purchase with the funds; this will help the lender to see where their money is going and why they should lend it to you.
3. Who is included on the management team? The lender wants to learn about the management team in order to see how the company is going to be run. If they do not have faith in the management team, you are going to have a challenge acquiring the funding.
4. Do you have any collateral to secure the loan? A lender is hesitant to offer money if they don't have something to guarantee the loan. Use some of your business assets to secure the loan and reduce the risk to the lender.
5. How much money are you personally investing in the company? When the owner of the company is willing to invest their own money, it reduces the risk to the lender and it also demonstrates your commitment to the business.

Corporate Credit Concepts specializes in micro loans. For more information about micro loans and how it might benefit your business, please CLICK HERE for a free phone consultation.

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