As any small business or entrepreneur knows, funding is one of the most difficult parts of starting a business. Banks are especially hesitant in giving out business loans to small and start-up companies, especially with the economical downslide of 2008. Crowdfunding is a great idea, but is only successful part of the time. Getting a business credit card is a great option… until the debt costs outweigh the business income.
The fact of the matter is, it is nearly impossible to get a business started without money, and it is nearly impossible to get the funding needed without an established business. This catch-22 is what sets most businesses down the path to financial hardship. However, there is now a new way to fund smaller businesses in the form of a microloan.
The SBA Microloan Program
The U.S. Small Business Administration has begun a program which provides funds to intermediary non-profit community oriented lenders to administer microloans to eligible businesses. Unlike a bank loan, which can range anywhere from $150,000 to $250,000, microloans range from $10,000 to $50,000, providing small businesses enough funding to cover basic costs for their start-up without the risk of crushing debt.
An SBA micro business loan cannot be used to pay off existing debt or purchase new real estate, but it can be used toward the purchase of supplies and machinery, working capital, inventory and supplies, and furniture and fixtures for the space. The payback plan of the micro business loan also varies in regards to the business’ planned use of the funds, the loan amount, and the needs of the business owner. Unlike large bank loans, a microloan is tailored specifically for the small business owner to succeed.
Micro business loans can make a macro-difference for your small or start-up business. These loans are designed to help you launch and expand your small business with a maximum six year payback plan, and interest rates spanning between eight and thirteen percent. Money lenders who offer microloans are beginning to become more prominent, making entrepreneurial start-ups less financially daunting.
Businesses that get loans at the time of getting started have the advantage of building their credit history as the business grows. As in case of personal loans, businesses too must ensure to pay back the borrowed funds within the stipulated time. Failure to make timely payments harms the credit history of the business, making it difficult to procure any business loans in the future. Banks plus other lending institutions not only consider the credit rating of the business, but also its profits in the past as well as the profit the business is likely to make when being granted the loan.
As far as the citizens of the US are concerned, those that are looking for loans in order to start a new business or continuing with the present one should look into a good source before approaching any banks. The US Small Business Administration is a government body that provides financial support to small business. Though everybody may not be granted help via this program, one should certainly make a sincere effort and try, as the loans available under this program carry a lower rate of interest, and the terms for paying back the loan are not so difficult.