What is a Microlending, and is It Right for Your Business?

by | Oct 29, 2021 | Business Financing, Insights To Business, Small Business Cash Flow, Small Business Funding, Working Capital

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A new business can take off like a rocket, but if a financial slow down occurs, it can spell disaster. Microloans are a good way to get the working capital you need without having to go through the struggle of meeting the demands of a conventional lender. Microloans are normally offered by peers or non-profit organizations who are willing to take a risk on a new business instead of only focusing on making money. Also known as peer-to-peer lending, microloans offer a lot more than just financial support.

Peer-to-Peer Lending

With peer-to-peer lending, borrowers get their funding from another business professional or non-profit organization, not a large corporate lender. Peer-to-peer lending often has fewer restrictions and loan amounts are much easier to manage. Also known as microlending, this type of loan is also much easier to qualify for. Part of the reason for this is that the lender often works hand-in-hand with the borrowing in how the money is used. The loan is much like an investment that will benefit both parties in the long run.

The Benefits of Microlending

There are several benefits of microlending that allow the borrower to take advantage of much more than working capital. They also have more options when it comes to returning the money. Many microlenders will forgo monthly payments in return for a percentage of the business’s profits over a specific amount of time. This leaves the option to borrow more working capital over time. Microlenders do not lend money for profit, they look for investment opportunities that will benefit both parties.

More Than Just a Loan

When applying for microcredit, you receive much more than working capital. As a proven professional with sound business practices to draw from, the lender will also make themselves available if you have questions or concerns about handling a difficult situation. The support and guidance they offer can open new doors of opportunity for your business. The money they lend you will allow you to explore those options or help you to maintain operations through a difficult period.

Need Working Capital? Apply for a Microloan

The best time to apply for working capital is when you don’t really need it. With a microloan, the money you receive can be kept in an account aside from that used for the day-to-day operations of the business. Even if you don’t use the money right away, you still have access to the lender when guidance or support is needed. Applying for a microloan is a good idea if you plan on making changes in the future or are trying to stay afloat during your off-season.

Microlending is one of the best ways to fund working capital. Not only do you get the money you need, you get flexible payment options and sound business advice from an experienced professional who can help you succeed. Taking advantage of this type of opportunity offers both parties a chance to profit it more ways than just money. It’s truly a win/win situation for both of you!