Best Practice: Before applying for a microloan have a good credit score and business plan to show business success and loan repayment.
Today’s Article: Access to Capital for Branding: Microloan
Microloans are typically under $50,000 and a source of funding for a start-up and existing business with good credit. Many microloan lenders are non-profit organizations with a mission to help start-ups and existing businesses find money when they are not able to secure a loan with a traditional bank.
Advantages of a Microloan Loan
1. Open to start-up and existing businesses
2. Access to collateral backed capital
3. Credit terms are more flexible than a traditional bank loan
4. Interest in investing locally
5. Debt (loan) source of money is at a lower rate of interest than angel capital or credit cards
6. Have a structured loan payback period over a number of years
7. Interest paid on the loan is tax deductible
8. Potential future funding
Disadvantages to a Microloan Loan
1. Debt that a business has to repay – creates more overhead in your business
2. Access to start-up capital is more limited
3. Loss of collateral assets if the loan is not repaid
4. Applicant needs to have good credit and requires running a credit report
5. An outside lender is now involved in your company – choose wisely
6. Can take time to secure
Action Step: If you do not qualify for a standard bank loan or cannot raise all the money you need from other capital sources, look into microloan. Review how much money you may need to borrow and research the microloan sources below:
Association for Enterprise Opportunity AOE
AEO is a national non-profit membership organization that has helped more than two million entrepreneurs access capital, training and related services.
Find an AEO Member in our Community
Small Business Adminstration (SBA)
The SBA Microloan Program provides loans up to $50,000 to help small businesses and certain not-for-profit childcare centers start-up and expand. The average microloan is about $13,000.
SBA District Offices near you: https://www.sba.gov/tools/local-assistance/districtoffices
Government resources for financing for your business! http://business.usa.gov/access-financing
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