Micro-loans are small loans often issued by non-profit community development organizations. Micro-loans are an excellent option for new business owners who are passionate about their idea, but who may not qualify for financing elsewhere.
The Small Business Administration defines a micro-loan as a commercial loan for less than 50,000 dollars. They are often issued SBA backed organizations, however not all micro-lenders are sponsored by the SBA.
Micro-loans usually have less stringent qualifications than traditional loans. They can be an excellent source of financing for business owners without good credit or collateral. Micro-lenders are generally not for profit organizations, seeking to develop businesses within their communities. Often these organizations are looking for a good idea instead of a good credit score. These organizations invest time and energy in supporting borrowers in order to help them develop their businesses. They may even go so far as to contact a borrowers personal references in order to help them qualify. This personal touch means micro-loans may be easier to qualify for than traditional financing.
Micro-loans are also relatively inexpensive compared to other types of start-up financing. Interest rates are generally between 5 and 18 percent. Micro-lenders also offer educational resources. SBA backed micro-lenders must offer training for borrowers in subjects like money management and business planning. These educational resources can translate into long term success for new businesses.
Micro-loans present the opportunity to new business owners to secure the financing they need, learn strategies for long term success and improve their business credit score.
As borrowers pay down the balance of their micro-loan they build up their businesses credit score. This improvement can help new businesses qualify for more traditional financing in the future. This coupled with the education micro-lenders offer helps ensure new businesses succeed. All these factors translate into micro-loans being an excellent type of commercial loan for new business owners.
Micro-lenders offer a personalized approach not often found at traditional banks. The loans themselves are inexpensive compared to other types of financing available to new businesses . Education helps new businesses plan for future success. Above all micro-loans present the opportunity for new business owners to build their business credit score.
Micro-loans may be the safest type of commercial loan available to new business owners.
If your uncertain about the nuances of starting or running a business, but a have a great idea, a micro loan may be right for you. The education offered by micro-lenders will potentially equip you with knowledge and strategies for long term success. The borrower-focused approach of these organizations means micro-loans may be easier to qualify for than other types of financing. Above all getting a micro-loan gives you the opportunity to build credit and can help you avoid pursuing more expensive methods of start-up financing.
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.