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Guide to Using Microlending for Small Business Owners

By Prerna Banwait | August 29, 2022

New business owners have a lot on their shoulders. Starting a new business isn’t easy and requires time, effort, and money. Anyone can surely use some extra funds considering the number of areas a new business owner has to invest in. Microloans are specifically available for small businesses to help them grow. 

Microlending can boost a business’s development process and help in many other ways. Microcredit or microloans are not too different from traditional business loans. However, there are a few reasons that make microlending better. 

One of the best parts is that money-borrowing apps like Lendee make transactions easier for both parties involved. One can request a loan from anywhere, and a lender can invest in any loan whenever they want.

What is microlending? 

Microlending is when small loans are made available to businesses that require additional capital. These loans can go up to $50,000, depending on the situation. Unlike most loans, microloans are unavailable through traditional lenders such as credit unions or banks. Lenders looking to invest in small businesses or want to help them grow offer these types of loans to entrepreneurs. 

New business owners may take up a microloan for many reasons. It could be because, to begin with, they don’t have much capital, their credit score is not the best, or they need a small amount of money. A microloan can be as small as $100. 

How does microlending work? 

Like any other loan, the borrower repays the loan through several payments with interest. The amount is usually smaller than a typical loan, and microlenders are more flexible when determining a payment plan. Microloans are often paid back over a term suited to the lender’s terms and conditions. 

Microlenders are typically more flexible when offering a loan. Your business can qualify for a microloan by presenting a reliable business plan and your projections for cash flow. Microlenders want to invest in a company that can showcase its projects and path to success. It is up to the microlender to choose whether or not they want to lend money online to your business. 

You may have to provide some sort of collateral or proof to reassure your lender if you fail to repay the loan. A personal guarantee is also part of the process, as there’s not much a new business can showcase when applying for a loan. The upside is that new or small businesses do not require to have much credit history. Because they’re a startup, it’s known that they’re limited on capital and are starting from square one. 

You can still qualify for a microloan if you have bad credit, low credit, or even no credit. Microlending can help those who cannot get funds from traditional lenders for whatever reason. 

A microloan can do wonders for all types of communities. 

For example: 

  • Minority business owners
  • Female entrepreneurs 
  • Low-income applicants 
  • Veterans
  • Freelancers 
  • Consultants
  • Sole proprietors 
  • New startups with limited employees 

These are borrowers who may face different types of challenges when applying for a traditional loan. That is why microlenders consider the applicant’s situation and circumstances before deciding if they’re capable of obtaining the loan. Some simply want to help those in need and are willing to lend small amounts of money that could change the applicant’s situation. 

Most microlenders look for a good business plan to invest money in. They sometimes help you develop a business plan, understand how much money your business should borrow, and assist you in the application process. 

Microloans can have higher interest rates depending on your lender. If you have a good credit score, you could land a lower-interest rate. 

What can you use a microloan for? 

The list can go on, but to understand the most common uses of a microloan, here are some examples: 

  • Buying inventory or supplies
  • Paying employees or covering training costs 
  • Paying for seasonal expenses 
  • Investing in a new marketing strategy or campaign 
  • Working capital 
  • Buying furniture or fixtures 
  • Buying real estate 
  • Purchasing new machinery or equipment 
  • Recovering from an emergency affecting the business 

You cannot use a microloan to pay off or refinance existing debt. If that is the purpose of additional funds, then a personal loan would be a better option. 

How to apply for a microloan? 

The first step you want to take is to explore all your options. There are charities and non-profit organizations that offer microloans to certain people. To further explore your options, you can research online. 

Remember that most lenders require documentation such as financial information, personal and business credit history, bank statements, and tax returns. You can access this information on the lender’s website to see who may offer a more straightforward application process. 

But some microlending platforms can directly connect you with lenders, one of which is Lendee. This money-borrowing app is straightforward and offers services to investors and borrowers. It allows you to access all the information you need regarding borrowing a microloan

How does Lendee work? 

You can connect with multiple lenders using this app that lends money. Once you input the amount you need and some personal information, Lendee connects you to a network of lenders. You can view your options and the different offers each lender gives you. 

You can select the offer and a payment plan that suits you best and expect to receive the money in just a few days! It’s as simple as that. 

What are the advantages of borrowing money with Lendee? 

  • High approval rates – Lendee wants to help, so your chances of approval are still fair regardless of your credit score. 
  • Loans at a competitive rate – You’ve got multiple options. Lenders will compete to provide you with competitive, fair rates. All you have to do is set your terms and wait to choose your best option. 
  • Flexible payback options – You can work with your lender to devise a payment plan that suits you. Automate your payments by linking your bank to your account. Leave behind the stress of making payments manually. 
  • Fast money – Traditional lenders can take multiple weeks to approve your application. Depending on how large your loan is, Lendee will have your funds in your account faster than any other platform. 
  • Improve credit score – Lendee reports your payments to the main credit bureaus, which can help improve your credit score. All you need to do is make your payments on time.

Lendee is not only an option for borrowers but also for those who want to invest in small businesses. The process is simple on both ends and makes it easy for new business owners because they understand the struggle. 
If you want to learn more about Lendee, visit, or access it on the go by downloading the Lendee app!