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.
Moving away from the non-profit lenders, the SBA and the CDFIs, independent micro-lending agencies exist and they offer fairly interesting programs. First American Merchant for example, is a reputable payment processing company that specializes in providing reliable short-term financial solutions for small businesses. With FAM, micro-loans come with acceptable rates and are quickly processed.
The importance of micro-lenders
Micro-lenders occupy an important part in the business world, in that they help the smallest of small businesses access capital, even when banks turn them away for having little credit scores and inadequate annual returns.
Small businesses are generally not well taken care off by traditional lenders like banks and credit unions, but if you haven’t declared bankruptcy within the last 12 months, are current with your personal debt and tax obligations and your business can demonstrate the ability to grow, you can definitely qualify for a micro-loan from both non-profit lenders and independent companies.