Raising Money

Why Microloans are ideal for Small Businesses

As a small and new business which needs money, you should do a little research. You will realise that it would be very difficult to obtain a small business loan from a bank as banks usually look to offer larger loans to businesses that have been in existence for three to five years. The idea of overspending on your credit card is not a good one either. Research would tell you that there are many small financial lending organizations that work specifically to fund small start-ups to help them achieve business growth.

Decide how much you need and fix an amount in your mind

If you have a fixed amount in mind to fulfil your needs such as stocks, raw materials, deposits for utilities, various start-up expenses and other necessities like internet etc. You should approximately fix an amount in your mind before you prepare to ask for the loan.

Study the loan repayment terms- Are they favourable to you

Choose the repayment duration where you can easily pay instalments per month and at a simple interest rate, which is usually low for most microloan lenders, and most of the small businesses will be able to pay it off early without penalty.

Plan how to use the loan

It is advisable to have a proper plan as to use the money. You could pay up a security deposit equal to one month’s rent and use the rest of the money to build your initial inventory. To keep the cost down, you had better plan to buy second-hand fixtures and merchandising for your office set up.

The application process

Applying online is a very easy process. One of the loan officers of the organisation will get back to you. You will have to be prepared to face a lot of enquiries over the phone and later in person. The process is not as easy as it sounds. Segregate and keep all your loan documents, including your business plan, in order. You may also have to put some collateral as security for the loan, if the micro loan organisation or the bank asks.

How long would it take for the loan approval to go through

Once the paperwork has been completed, the process moves forward quickly. You would need to provide copies of your previous income tax returns, and the lease agreement of your place of business. The micro loan organisations usually respond within the specific time mentioned to you with their decision. They are usually customer-friendly and ready to answer any questions. One cannot expect such services from a regular bank. The micro lenders also stay in touch and it would seem that they care for your success.

Tips for small businesses seeking a microloan

Taking the advice and the opinions of other business people around you is wise. You should be very realistic about your projects and expectations. You should keep a careful eye on your credit and first and foremost you need to get your credit report. The second most important thing is having a business plan. It serves as an anchor for your entire planning for your business and brings them on one platform. It is the foundation from which your business is born. If you have a strong business plan and use the loan money most prudently, your business would thrive and flourish even without huge capital inputs.

Entrepreneurial Learning

The author says that a small and new business which needs money, you should do a little research. You will realise that it would be very difficult to obtain a small business loan from a bank as banks usually look to offer larger loans to businesses that have been in existence for three to five years. The idea of overspending on your credit card is not a good one either. Research would tell you that there are many small financial lending organizations that work specifically to fund small start-ups to help them achieve business growth.

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