You are probably aware that operating a business successfully is never an easy task. You may have a great idea to convert a scarcity in the marketplace into a lucrative venture. However, on a shoestring budget, transforming your dream into reality can be a tall order. Like all entrepreneurs, you need a sufficient sum of money in the form of capital at every phase. This is the reason why you have to search for suitable external loans offering low rates of interest. Even research shows almost 90% of all startup businesses go into liquidation within a year. This is the owners don’t have the necessary resources to overcome this cash crunch. After all, money is the vital lifeline of any commercial or industrial enterprise.
Why should entrepreneurs consider taking microloans?
Industry experts admit the current state of the world’s economy makes it difficult for entrepreneurs to obtain loans. Most lenders have no option but to impose stringent eligibility requirements on such businessmen. These financiers generally ask for relevant information. This includes information regarding the nature of their organizations such as proprietors operate and its market operations. Moreover, they need to know why such owners need such sum of money. They may even have to provide suitable collateral. After all, they need to make a living by earning an adequate return on the amount they give out. This is the reason why such professionals suggest such entrepreneurs should consider applying for microloans.
These experts explain that the concept of microlending is relatively new in America. However, this form of financing is extremely popular in many other parts of the world. It has been instrumental in helping people discover their unknown entrepreneurial talents. The businesses these individuals establish with this money help them improve their lifestyle. In the process, they become important members of the societies they live in. Even the governments are being to realize the necessity of such loans in eradicating poverty. In the United States, the ‘Small Business Administration’ is principal regulatory authority for disbursing such funds.
Eligibility requirements
Entrepreneurs need to realize that not all businessmen can avail SBA microloans. This government agency works in collaboration with a number of small lenders throughout the country. Such financiers set their own guidelines on who can avail such loans. However, proprietors who wish to avail such funds need to following important requirements:
- The establishment’s such businessmen should be profit-earning concerns;
- Such entrepreneurs should carry out their activities in an area where a particular lender under the scheme operates;
- They need to provide sufficient evidence to prove they are financially solvent. During a period of 2 years prior to applying for such loans, they should not have filed an application for bankruptcy. Moreover, they shouldn’t get a notice of foreclosure on any of their properties;
- These proprietors should have enough income to make timely repayments on such loans. For this, they should submit financial statements of their businesses and necessary tax returns;
- Such businessmen should have an impeccable credit history. In the process of conducting their market operations, they have never defrauded any other business or individual; and
- They need to prove they could not get the money they need from other sources.
A prominent financial specialist from organizations like Liberty Lending USA point out microlending is boon for small businesses. The requirement of the lenders under this scheme is less stringent in comparison with a traditional bank. Such experts go on to point out the following 3 important benefits of this mode of financing:
- Providing necessary training
Entrepreneurs applying for SBA microloans come from various backgrounds. Not all of them have the necessary skills, training or education to operate their startup organizations successfully. The regulators of this government agency acknowledge this important fact. This is why they instruct their lender to assist these businessmen in all possible ways. Such financiers provide them with all necessary technical know-how to run their establishments. This is in addition to lending the money they need. This ensures that the borrowers of such startup concerns are less likely to make costly blunders. This puts them in a better position to repay their installments on time. In the process, they are able to improve their credit ratings in the market.
- Flexible eligibility requirement
Many people in America fail to see the difference between microloans and their traditional counterparts. It true that in both cases, entrepreneurs need to prove their credit worthiness. For this, such businessmen need to have a perfect credit history and provide suitable collateral. In some cases, they need to produce personal guarantees. However, the lenders operating under the control of SBA have a more flexible approach. The financiers are normally willing to visit the concerns of such businessmen. This is to see for themselves how successful they are in running it.
In some cases, they even go to the extent of calling up their business associates. Such a move helps them to verify certain facts and clear their doubts. This makes it easier for the proprietor to obtain such loans.
- Time
Entrepreneurs are aware of the value of time. When it comes to applying for a loan, they expect to get the money they require within a short period. Otherwise, they can have a very difficult time carrying out their business activities. In some cases, their market operations can come to a standstill if they don’t get the funds they need. The situation becomes even more uncertain when they are facing a cash crunch. Unfortunately, most banks take months to process and approve most commercial loans. However, this is not the case with microloans. The entire procedure only takes just 14 days.
Experts say microloans are essential for entrepreneurs operating small businesses. They just need to go through the above 3 important benefits to clear any of their doubts. The proprietors only have to prove they have a good credit history to get the money they need. Moreover, the ability of such owners to make timely repayments also boosts their creditworthiness in the market. This is an important fact they can’t afford to overlook. It enhances their reputation in this environment.
- Crowd-Sourced Funding
A moderately late sort of business subsidizing is publicly supporting, requesting financing from hundreds or even a large number of little speculators. In spite of the fact that every financial specialist may just make a little commitment, the whole can break even with what a solitary extensive venture firm or bank may give. Publicly supported financing can really be fun: an infectious video or an item thought that strikes individuals as cool can be sufficient to get a subsidizing effort in rigging. Be that as it may, a percent of the assets raised regularly goes to the public support stage instead of in your coffers. Likewise, funders may expect a snappy profit for their speculation, for example, accepting your new, cool item a couple of months after the subsidizing round has finished. This can put you off guard, in that you probably won’t have the capacity to convey, as guaranteed, which can result in an open disappointment for your organization.
Author Bio:
John Bell has been writing articles on Social Media, skilled business consultant and Financial Adviser for the last few years. In this post, he has written about the benefits of Social Media Marketing, Business, Finance as well as the features related to the same. for more details you can visit here
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