This seems to be the age of the entrepreneur, with small startups such as Facebook and Twitter proving that small businesses can grow – potentially exponentially with the right resources. Unfortunately, success stories like Facebook are rare in the small business world, with over half of small businesses failing within five years of their startup, mainly due to lack of funding.
As any small business or entrepreneur knows, funding is one of the most difficult parts of starting a business. Banks are especially hesitant in giving out business loans to small and start-up companies, especially with the economical downslide of 2008. Crowdfunding is a great idea, but is only successful part of the time. Getting a business credit card is a great option… until the debt costs outweigh the business income.
The fact of the matter is, it is nearly impossible to get a business started without money, and it is nearly impossible to get the funding needed without an established business. This catch-22 is what sets most businesses down the path to financial hardship. However, there is now a new way to fund smaller businesses in the form of a microloan.
The SBA Microloan Program
The U.S. Small Business Administration has begun a program which provides funds to intermediary non-profit community oriented lenders to administer microloans to eligible businesses. Unlike a bank loan, which can range anywhere from $150,000 to $250,000, microloans range from $10,000 to $50,000, providing small businesses enough funding to cover basic costs for their start-up without the risk of crushing debt.
An SBA micro business loan cannot be used to pay off existing debt or purchase new real estate, but it can be used toward the purchase of supplies and machinery, working capital, inventory and supplies, and furniture and fixtures for the space. The payback plan of the micro business loan also varies in regards to the business’ planned use of the funds, the loan amount, and the needs of the business owner. Unlike large bank loans, a microloan is tailored specifically for the small business owner to succeed.
Micro business loans can make a macro-difference for your small or start-up business. These loans are designed to help you launch and expand your small business with a maximum six year payback plan, and interest rates spanning between eight and thirteen percent. Money lenders who offer microloans are beginning to become more prominent, making entrepreneurial start-ups less financially daunting.
If you are a small company interested in a micro business loan, there is a comprehensive list of SBA approved lenders on their website. The list is broken down by state, so no matter where your business is located, you can speak to a local microloan lender here to get your business financed. There are also online lenders such as trustleaf.com and PayPal’s Working Capital program. However, it is important that you do significant research and ensure you are getting the best microloan offer from these companies.