Exploring the Benefits of Microlending for Small Businesses

Exploring the Benefits of Microlending for Small Businesses

Microloans are a popular alternative to traditional lending options, especially when it comes to startups and small businesses. It is a marvelous opportunity for a kickstart in the chosen area on better terms — more flexible qualification principles and low interest rates. Stay tuned to check its core aspects and reasons to rely on this service. Let’s roll in!

Everything You Should Remember About Microlending

    Despite its popularity, this service is a matter of confusion and misconceptions:

  • Misbelief — it is only sufficient for projects in developing countries.

  • Fact — it stands out as a universal program across markets. For instance, the Small Business Administration Microloan Program can issue thousands of approved microloans annually — 4,510 back in 2021.

    Compared to traditional loans, the service providers are individuals rather than credit unions and banks. Check the table below to get to know more about their differences.


Traditional Lenders


Primary objective

Raise profits through fees and interest

Invest in the development of small business projects and ideas

Target beneficiaries

Businesses with more capital at their disposal, including mid-sized and large organizations

Those who aren’t eligible for traditional lending conditions or want to get a smaller sum

Additional support

In most cases, none

Frequently incorporates auxiliary training and coaching for interested parties

    Microloan characteristics vary by size and regional availability. The minimum loan amount is also different:

  • It can be as small as $50 in the microlending market.

  • SBA issues loans from $10,000 to $50,000, on average.

Why Choose Microlending for Your Business?

    This service was originally designed for communities that are typically excluded from traditional funding tools, but its global reach has expanded drastically and makes it an excellent win-win for these categories of end users:

  • new startups;

  • small businesses;

  • sole proprietors;

  • consultants;

  • veterans;

  • minorities;

  • freelancers, etc.

    It is easier to get approved for such a deal since the role of no credit or a bad one won’t ruin your chances. Nonetheless, you will still be required to comply with certain requirements. Microlending providers usually consider these parameters:

  • an applicant’s business plan;

  • business revenue;

  • additional sources of income;

  • credit scores;

  • expertise in the field, including the general duration of time spent in the market.

    Microlending lets you satisfy numerous purposes too, including the following:

  • capital-operating purpose;

  • risk mitigation;

  • troubleshooting like post-crisis recovery;

  • marketing investments;

  • employee training costs;

  • investing in supplies, inventory, etc.

Let’s view some main reasons to rely on this financial aid’s advantages:

  • Community development — it is a wonderful opportunity to boost the potential of the target field, community, etc. in a certain geography, promoting economic growth and stability.

  • Support services — such offers let enthusiasts deepen their understanding of finance and supply chain management, improving their performance and ensuring their business success.

  • Access to funding — microlending allows for simpler market entry, especially when it relates to entrepreneurs who may not qualify for traditional loans. Those who are considered high-risk applicants in the traditional lending realm receive better offers in microfinancing.

  • Credit building — companies with no credit won’t be able to gain the desired amount of funds in banks, so creating a solid foundation for that is what microlending is here for as well.

  • Longer payback periods — a lot depends on the service provider, but it isn’t rare to gain terms of up to six years to fulfill your responsibilities upon the target microlending agreement.

Top-Notch Microlending Platforms to Consider for Small Businesses

No matter how advantageous these deals are, your attention to detail and in-depth understanding of how things work will be crucial:

  • One of the aspects is that you might be requested to provide personal guarantees or collateral to obtain a microloan in the worst-case scenario when you don’t repay the loan.

  • Threshold limits may be not as satisfactory for some purposes as traditional loans. While there are companies that support microloans of up to $200,000, it is usually reduced to the upper limit of $50,000 or even less.

  • You won’t obtain the sum immediately. Disbursement typically takes two weeks, but it can be prolonged up to sixty through ninety days.

    Now that you are aware of the potential hidden pitfalls of the deal, it is high time to check the best microlending providers to consider at first:

  • Main Street Launch;

  • CDC Small Business Finance Corp.;

  • The SBA Microloan Program;

  • Pursuit;

  • Grameen America;

  • Accion USA;

  • Justine Petersen, and more.

Don’t hesitate to opt for peer-to-peer and crowdfunding alternatives. The key is to see whether the target provider’s conditions satisfy your purpose for a small business loan.    

Final Thoughts

At the end of the day, supporting small entrepreneurs is a microloan endeavor’s primary goal. If you won’t be able to borrow money from establishments like credit unions, relying on the services of SBA and other providers may be the answer. Don’t miss out on a chance to run your dream business and develop your community with diverse innovation and timely financial support.

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