Start your Business with a Microloan

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Small business funding is one of those parts of a business that takes a lot of your time, it’s sometimes difficult and painstaking, and rarely feels like the results were big enough to justify the time. How many small business owners head off to a venture capital firm or angel investor and walk off with more money than they know how to spend? For the rest of the world’s small business owners, they have to resort to smaller loans.

There are plenty of uphill battles that come with funding. First, the banks are under a lot of pressure and not making loans as readily and indiscriminately as they used to which makes even the most promising businesses asking, what’s next. Second, the economy has affected individuals in sometimes catastrophic ways and because of that, entrepreneurs who have a less than stellar credit history often find themselves in even more of a dire situation.

Fortunately, even if you don’t qualify for a bank loan or funding from venture capital or angel investors, you may qualify for a microloan. There are two types of microloans that are worth considering.

SBA Microloan

The United States Small Business Administration offers microloans for shorter term financing needs. Working through intermediaries like non-profit lending organizations, the SBA can provide small loans ranging from a few thousand dollars to a maximum of $50,000. Although they are short term loans, they can only be used to finance payroll, purchase new machinery or purchase inventory or supplies. These loans may not be used to make payments on past debts. These are not unsecured loans so a form of collateral is often required before the loan is made.

Private Microloans

The Internet now makes it easy to apply for a microloan. There are numerous websites that bring private lenders and borrowers together to help entrepreneurs get the capital they need. In this case, the lenders are most often individuals who want to put their extra cash to work or provide a charitable loans that entrepreneurs can pay back with very little interest. An entrepreneur can make a request including financial information about their company, how the money will be used and proof of their credit worthiness and individuals can make small loans, sometimes as small as a few hundred dollars. One of these site, Kiva, allows people all over the world to make low interest microloans to entrepreneurs in developing countries.

If your business startup is in its early stages and you need an infusion of capital but haven’t been able to secure commercial funding, a microloan might be just what you need. These loans are much easier to get and can even help you repair your damaged credit if you were a victim of the recent financial crisis.