Rhode Island Chronicle

Micro loans interest rates remain one of the major factors hindering millions of businesses in the United States and other parts, even with business partnership. This is so as many business owners do not have enough information about micro loans and how they operate.

A microloan is designed as a financial tool to help businesses struggling with their finances and do not have a credit record or otherwise do not qualify for a loan from a bank. Microloans are generally low-interest short-term loans, ranging between $5,000 and $50,000 and are usually provided by small-business-friendly lending organizations that work with the U.S. Small Business Administration (SBA).

Reasons for a microloan

Several small businesses and their owners have been turned down by banks and other such lenders for different reasons, making microloans one of the best possible options available to them. Some of the reasons include:

• Inadequate collateral

• Not enough cash flow

• Bad Credit history or credit score

• Small loan amounts

How a microloan works

A microloan is often used by early-stage start-up businesses or other small businesses fulfill operational expenses due to short term cash flow problems. Microloans work in 3 simple steps – 

• Find a microloan provider approved by the SBA

• Do some research to ensure their business nature and background to make sure they are a good fit.

• Apply and see if the requirements for the loan are met.

Pros of Micro Loans

• A microloan is a good option for a small business in need of a small amount of money.

• The requirements for a microloan provided by a lender are relatively more flexible than those of a proper bank. 

• Some lenders offer technical support, guidance to borrowers through the loan process.

• The interest rate of a microloan is less than that of a credit card.

Cons of Micro Loans

• The annual interest rates for a microloan are usually higher when compared to the annual interest rates for a traditional loan or an SBA loan.

• The average amount for a microloan is around $13,000, which might not cover the business’ expenses.

• Qualifying for a microloan varies from lender to lender and their requirements may vary with some lenders requiring a personal guarantee or collateral.

Media Contact
Company Name: Funding Box Company
Contact Person: Viola D. Hayes
Email: Send Email
Address:4450 Elmwood Avenue
City: Philadelphia
State: PA
Country: United States
Website: fdbox.com