Microlending has grown increasingly popular for small business owners in recent years, as a means of obtaining the financing necessary to help their businesses succeed. Microlending is the practice of providing small amounts of capital to entrepreneurs who may not otherwise qualify for traditional bank loans. The funds are typically used to purchase equipment, cover operational expenses or finance other investments needed to grow and expand a business.
Microlending: Advantages Over Traditional Banks
Unlike traditional bank loans, which require collateral and rigorous credit checks, microlenders focus primarily on the potential success of an entrepreneur’s business plan. This means that even entrepreneurs with minimal credit history can obtain capital through microlenders. Additionally, microloans tend to be very short term with terms lasting between three months and two years, making them easier and more flexible than traditional bank loans.
In order to make these services available to cash-strapped small businesses, microlenders typically charge higher interest rates than those found at banks or other traditional financial institutions. However, due to the short-term nature of these loans, repayment costs are usually less than those associated with long-term loan products from banks or other lenders. Moreover, many microlenders also offer counseling services designed to help small businesses create successful plans for launching or expanding their operations.
Benefits of Micro Lending: Cash Access
Microlending can provide numerous benefits for small business owners by offering access to capital when it may not otherwise be available from traditional sources. Additionally, because of its shorter repayment terms and greater flexibility in underwriting standards, microlending provides entrepreneurs with a more efficient way of obtaining the funds they need right away without having to undergo lengthy approval processes or make lengthy commitments of time and money. Furthermore, many lenders provide additional resources such as account management tools and financial advice that can help small businesses better manage their finances and increase their chances of success in the long run.
A Tool Going Forward
All in all, microlending represents a powerful tool for budding entrepreneurs looking for ways to obtain financing quickly and efficiently in order support their businesses’ growth aspirations. With its relatively low borrowing costs compared to long-term bank loans and its emphasis on helping entrepreneurs develop sound business plans rather than assessing credit histories heavily, it’s no surprise why this method of lending has become so popular among small business owners over the last decade or so.
This just touches the tip of what’s available for your small business; the experts at Private Client Capital Partners are well-equipped to facilitate micro-lending opportunities. Due its proven track record as an effective source of capital for burgeoning businesses around the world, it’s likely that this trend will only continue into the future as well. Contact us at your convenience for more information.