A microloan is a small term loan that ranges between $5,000 and $50,000 and can be used by a small business in its early stages to pay for inventory, machines, office and business supplies and equipment, working capital.
In 2009, the SBA started a microloan program under President Barack Obama’s administration, enabling small businesses to get as much as $50,000 in loan. Over the years, the program has provided tens of thousands of loans to different small business owners to help them start a new business or expand an existing one.
Why Businesses need micro loans
Small business owners have been turned down by banks when applying for a traditional loan for different reasons and ultimately look for ways on how micro loans work. Many of the factors leading to being turned down by banks double as the reasons for going for micro loans. Some of these reasons are briefly highlighted as follows:
Factors considered by lenders before providing a microloan
Lending institutions take some factors into consideration before providing borrowers micro loans. Some of these factors include
Pros of Micro Loans
Cons of Micro Loans
There are several other financing options available to small business owners who do not find micro loans suitable.
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