Here in August there is a debate as to whether businesses are still looking for loan opportunities, whether banks are making these options available for small businesses, and whether there are opportunities for financing that small business owners may be able to use in order to grow their company and become more prosperous even during these tough economic times. Some small business owners have argued that major banks are only willing to make loans to companies that don’t necessarily need them or are large, well-established businesses, but small businesses have repeatedly been stated as the source of job creation that our nation needs, but this particular area of job opportunities has been lacking for quite some time.
Yet, there are businesses who may be in need of financing but are unable to qualify for major small business loans from some of the top banks in our nation, but have turned to alternative sources of financing like microloans as a way to help them begin the process of injecting capital into their business in the hopes that this investment will pay off and allow for more success in the coming months. While microloans are not the only option in terms of alternatives that a consumer may have, there can be some benefits to this particular type of loan for small businesses, particularly when programs like the SBA’s microloan program is used or this funding is accessed as a way to build a business’s credit history and score.
There are some companies that have been denied a small business loan simply because a bad credit history or the lack of history when it comes to their repayment of certain debts. While vendors may allow lines of credit for certain companies, this does not necessarily get reported to credit bureaus and, as a result, businesses who may be a relatively safe financial risk may be denied the financing they need. However, options like microloans, which again can come from various sources that range from the SBA, peer-to-peer lending networks, or even some banks or credit unions, can not only give businesses a small amount of capital to work with, they can also potentially benefit a business in terms of showing their ability to handle debt obligations.
Yet, some microloan programs also offer business assistance or even training options that may help these companies better apply the funds they receive. Also, these types of loans are seen as helpful for small businesses because they can range in the amount that a borrower might be able to acquire since some microloans are only a few hundred dollars while others can offer tens of thousands of dollars to a small business.
If a business owner is able to acquire one of these options though, they do need to see whether it will help them build a more positive credit history, as again this may aid any efforts in the future to acquire a more traditional small business loan from a larger financial institution, but looking at not only factors like the interest rate and repayment timeframe that must be met are just a few areas of review that small business owners are prompted to pay careful attention to when borrowing. Also, some microloans may have limits on how they can be used, so this is another area of research that business owners have traditionally looked into, as some of these loans may be helpful and available to specific business owners, but they are not necessarily going to always be in a company’s best financial interest and, as a result, should not be entered into without proper research as to if they will be affordable or helpful for a particular business.