Small business loans available for companies in need of capital who may be unable to find traditional forms of small business financing have often used microloans to their advantage as this alternative to larger loans for small businesses may not only bring about opportunities to borrow but can also offer certain benefits for these businesses as well. Typically, entrepreneurs and small businesses that are just starting are those who will seek out funds from a small business loan through a microloan program due to the fact that they are usually only offered in smaller amounts, but again, for these small companies, this type of capital can be greatly helpful in getting their business up and running.
While there are different microloan options that businesses may explore, one of the more widely known programs is from the SBA Microloan program, and according to the SBA website, these loans can be as large as $50,000, even though the average size is about $13,000 and they offer businesses funds to use for purposes like purchasing inventory, furniture, equipment, or even as working capital. Also, this particular microloan program requires the intermediary, which is the lender, to provide training and technical assistance to borrowers, which obviously can help them better establish, grow, and maintain their business.
Understandably, this form of assistance which is offered through certain microloan programs can be helpful to the smaller businesses due to the fact that some companies may either be owned by an entrepreneur who might have little or no experience running a company but could benefit from advice from individuals in a particular industry or who may simply have experience in general business practices. Also, lenders who are charged with implementing these training programs will have a particular borrower’s interests in mind due to the fact that if a company is better equipped to use capital from a microloan to benefit their business, the higher the likelihood that this particular borrower will be able to repay their debt obligation.
Also, some microloan programs, like those from the SBA, are also available to underserved companies, areas, or individuals who may not be able to acquire a more traditional form of small business financing. As an example, an article on smSmallBiz.com stated that individuals who may qualify for this particular microloan program are, “…borrowers with little or no credit history, low-income borrowers, and women and minority entrepreneurs who generally don’t qualify for conventional loans or larger SBA guaranteed loans.” Understandably, microloans are no sure thing for small businesses in need of funding, but may be an alternative for companies that do not qualify for or necessarily need a large, traditional small business loan.
However, small businesses who may benefit from these particular types of loans are being prompted to research any microloan options they may have, as there are, again, options for these types of funds outside of federal programs like the SBA and business owners must research the costs of these loans, if a particular lender will offer any sort of guidance for an entrepreneur, and aspects of microloans, like the repayment terms, need to also be carefully scrutinized by borrowers before entering into any type of financing agreement