What Are Small Business Microloans?
In 2019, over 5,532 microloans were needed for small businesses in the United States.
Many small businesses need money to grow or stay afloat but do not have the capital to secure a loan. What are they to do?
This is where microloans thrive.
Microloans can be used for small businesses that want to grow or need help to stay open, but do not have the necessary funds to do so. This is because some banks have strict requirements for businesses to secure a loan and will only loan out large amounts, even when a small loan is all that is needed. This makes it difficult for small businesses to borrow the money they need.
How do Small Business Microloans work?
The main benefit of microloans is that the approval process is much easier and helps small businesses more quickly than a bank would. With microloans, credit checks and repayment history is factored into the application process but are not necessarily the deciding factor for the borrower. The information provided is used to determine the risk involved for the investor, but it is up to them if they lend you money or not. This is because the investor is the one choosing to who they will lend their money. These checks also help them decide if they want to charge higher fees for borrowing or not.
On websites such as Lendee, there is a list of investors waiting to find a borrower. Anyone can look at their prerequisites to see if they qualify or not before trying to borrow from them. Once a connection is made, the investor has the option to lend them money or not, set the terms and conditions of the loan, and set the fees involved.
The business might be paying more than they want if the investor decides to charge them a higher fee, but it can get the money needed.
Your Small Business Can Benefit From Microloans
Microloans have benefitted small businesses of all kinds because of the simplicity that they offer.
Many small businesses will need new equipment and resources at some point, but that does not mean that they will warrant a bank loan. Banks are mostly interested in financing a loan if it is worth a lot of money so they can make more on the interest and fees. Also, it is the same amount of work to finance $2,000 as it is $100,000, making it less appealing for them to put in the work to lend smaller amounts. This limits their clientele to business owners that operate large businesses and need large loans.
This eliminates small businesses from participating, requiring them to find alternative forms of financing. Microloans offer smaller amounts of money to be lent out, which might be all the small business needs. Microloans for small businesses offer quick and easy financing that can help businesses keep operating, and growing, or even help new businesses get up and running with the small amounts of money necessary.
Microloans are not the answer for financing large amounts of money, but they can help combat those small business expenses that pop up out of nowhere and often hinder operations from moving forward. Sometimes, just a couple hundred dollars can make the difference between keeping a small business afloat and making them struggle. This is especially true with new businesses that are trying to get off the ground.
A great example of this would be if a brand new bakery just opened, but its oven stops working in the middle of a big order. The oven repairman comes out and fixes it immediately, which is great for the business until he gives them the bill. It cost $800 for the immediate repair and the bakery does not have that money to spare. Using an app such as Lendee, they could secure that money quickly and set up a payment plan to pay it off. That way, they can pay for the repair while their business can keep running to make the money needed to pay off the loan and keep their livelihood.
Without microlending, such emergency payments could cripple a business and hinder anyone’s bottom line. Microloans could be a great help in times of need for any business.
How Lendee Can Help Secure Your Financing
Lendee is a great tool for businesses that are looking for quick and easy ways to secure a microloan. Lendee takes care of all the hard work for the investors and borrowers by laying out the terms and conditions for both parties, collecting payments, and taking care of the stresses that come with lending people money. Lendee is unique in that it creates a “lendee score” for each borrower based on their FICO score and bank account info provided, making it easier than ever to see how they prove overall as a borrower.
With investors ready to go on Lendee, it will take no time to find someone willing to lend your business the money needed. That way, your business can make any necessary purchases to stay afloat or grow, making so many things possible.
Check out Lendee today to learn more!