Without funding, many small businesses fail to succeed. As an entrepreneur, you could be in need of funding for multiple reasons. Perhaps you are attempting to startup a small businesses, which requires many tools for startups. More cash flow could also be necessary if you’re looking to expand your company. Regardless of the reason, you need financial aid. One group that you can look to for such capital is microlenders. Below, you will find the steps to receive financing from microlenders for small businesses.
Determine If You Need A Microloan
To begin, determine if you truly need a microloan before getting in touch with microlenders. There are three reasons you might be in need of a microloan. Firstly, you do not need or want the high amount of money commercial banks offer in loans. Secondly, this would be your first loan. Thirdly, you don’t have a lengthy credit history and/or are relatively new to the entrepreneurial world. If none of those three reasons can be applied to you and your current situation, you do not need a microloan. If one or more does apply, continue on to step 2.
Create A Detailed Business Plan
Microlenders are going to want proof of a plan prior to offering you a loan. Business plans are especially important when applying for microloans because of the point you are at with your business when seeking the loan. As you may know, microloans are specifically beneficial to entrepreneurs who are either starting up a business or expanding. With this in mind, understand that microlenders need a physical, written guarantee that the startup/expansion can and will occur. They want to be aware of how you will promote your new business. Create a detailed business plan for you to follow to ensure that you will be able to pay back the microloan. This reassurance is critical to receiving a microloan.
Calculate Potential Expenses
You must, afterall, know exactly how much funding you desire in a microloan before applying for one. After you calculate how much financial aid you will need, meet with an accountant. Get help from an expert to ensure that you are heading down the right path. An accountant can also simply check over your work to guarantee that the amount you came up with is correct. They can also provide you with tips to secure business funding in the future. Accuracy is key when it comes to receiving microloans from microlenders.
Provide Up-To-Date Financial History
As an entrepreneur looking to either startup your business or expand it, you most likely do not have much financial history to show. Certain microlenders may ask for your personal financial history if they do not see enough in your company’s history. They will need enough proof to determine that you will be able to pay back the microloan. Luckily, most microlenders approve microloans even without ideal financial histories. If you are free from bankruptcies or other crucial negatives, you should be eligible to receive a microloan.
Offer Collateral To Secure The Loan
After deemed eligible, you must offer collateral to secure the microloan. The amount of collateral required will vary from microlender to microlender. You are able to use personal and/or business assets to secure a microloan. Such assets can include company equipment and transportation vehicles. The notion of meeting with your accountant again to decide how to provide collateral is a good one. Once you do, you will have secured your microloan and can begin the process of closing the loan.
Microloans can ensure the success of small businesses. As an entrepreneur, you need to understand how to get a microloan from microlenders. The first step is to determine if you actually are in need of a microloan. Next, create a detailed business plan. After that is complete, calculate your potential expenses. Then, you must provide up-to-date financial history. Lastly, offer collateral to secure the microloan. Follow these steps to receive financing from microlenders for small businesses.