The last five years have seen a drastic change in the world of small business finance. Banks and credit unions are now focusing more on small businesses which have been around for a while and are in need of larger loan amounts, as opposed to new businesses with small funding needs. The result of this trend has been an overwhelming increase in the average loan size for a typical bank and nowadays most lenders consider a loan size under $50,000 as a micro-loan.
Where to get a micro loan
Micro-lenders are often non-profit organizations, which lay a focus on small businesses that have the potential to eventually break out and have the potential to largely impact the economy of their community in the future.
These micro-loans often come in very favorable terms such as little to no interest and long-term payment to help owners achieve their desired goals.
In the US, the Small Business Administration (SBA) is the most common micro-lender. The SBA’s micro-loan program offers loans up to $50,000 through non-profit organizations, which have experience in both business funding and management, and can give very useful advice to a new business owner. The SBA allows a maximum repayment term of six years and interest rates vary between 8 and 13 percent.
Besides the SDA, there are federally licensed Community Development Financial Institutions (CDFIs), which access both private and public funds to offer micro-loans to small business owners. Most of these CDFIs focus on low-income borrowers and social minority groups.…Read more