Microloans Present Viable Funding Options for Entrepreneurs

Garmeen Bank, Gierach Law Firm, microloan lenders, microloans, Naperville small business law attorneys, online microlending, SBA microloans, small business ownersMicroloans are small loans made to small business owners and entrepreneurs. The borrowers of microloans are typically those who lack the necessary credit history, steady employment, and collateral necessary to receive a loan from a traditional lending institution such as a bank. Microloans can be used as working capital. They can also be used in order to purchase supplies, fixtures, inventory, furniture, machinery, and any equipment needed to get a small business off the ground.

Lenders of microloans include both state and federal Small Business Administrations (SBA), non-profit organizations, and online startups. The extension of microloans are intended to help those entrepreneurs who are typically underrepresented in the business ownership community. Such borrowers include minorities, young adults and women. Recently, microloan funding organizations have been in the news for the exciting opportunities they are providing to small business owners and entrepreneurs in need of loans.

The Grameen Bank Microfund

The Garmeen Bank began its microfunding activities through the extension of $1,500 loans to the developing world’s most needy female entrepreneurs. Though $1,500 may seem like a small amount, it carries substantial weight in certain parts around the globe. Since expanding its microfunding to the U.S., the Grameen Bank has become the model of successful microlending. In fact, since 2008, the Grameen Bank has lent a total of over $150 million to over 28,000 deserving female entrepreneurs. The Grameen Bank uses a hands on approach as part of its lending strategy. In addition to providing microloans, women are put into groups and work with loan officers in order to learn relevant financial skills, such as credit establishment and the process of opening a bank account.

Online Microlending

Kabbage is an online microlending company that provides small loans to small business owners and entrepreneurs. Kabbage treats the loans more like cash advance transactions, with the amount of credit extended between $500 and $50,000. The best thing about Kabbage is the fact that its interest rates of between two and seven percent are on par with the rates extended for traditional business loans.

In order to get approved for a loan, an entrepreneur must have an online business presence, because the Kabbage online application utilizes data from a borrower’s online payment services and e-commerce stores. Providing additional access to other online accounting records can help borrowers receive a microloan at a lower interest rate.

SBA Microloans

The SBA extends microloans up to $50,000 to small businesses that need funds for starting up or expanding their business. The average microloan from a SBA is around $13,000. These loans are accessed through SBA intermediary lenders, who are community-based nonprofit organizations with significant experience in delivering loans, and also technical and management assistance. As a result, each intermediary lender, and not the SBA, sets the credit and lending requirements for loan approval.

Microloans are a great option for those who have already been denied loans from banks, and other traditional lending organizations. If you are interested in having an attorney review a loan agreement for your small business, contact the experienced Naperville small business law attorneys at the Gierach Law Firm.