Why You Should Consider a Microloan for Your Startup
If you’re planning to start your own business, you probably already know that startup capital is difficult to come by. Especially if the amount you need is relatively small. The time and effort of the paperwork involved aren’t worth the risk of making the loan for many banks, and as a startup, you won’t have a track record to convince them your business deserves funding. Here is why many small business owners are turning to microloans instead.
- You are just starting your business
- You don’t have a long credit history
- You have limited access to traditional loans
- You plan to use proceeds for equipment (such as machinery, fixtures or furniture), purchasing supplies, materials or inventory, working capital, and leasehold improvements.
What is a Microloan?
A microloan is exactly what it sounds like – small loans for small businesses made by designated lenders. In general, microloans are loans up to $50,000 and are used to help cover startup costs and other early expenses for small businesses. These loans can be more flexible than traditional bank financing and should be used as a stepping stone to someday receive traditional lending through a financial institution.
Microloan funds are distributed by designated community-based non-profit intermediary lenders, such as GROW. In addition to providing small business financing, many lenders provide technical assistance to their clients. GROW is a great example of this type of lending, providing additional programming, business counseling and mentoring services to its borrowers.
How can you increase your chances of approval?
- Do your homework: Focus on the 5 W’s of your business (who, what, where, why & how)
- Know your audience, research your competitors & develop your value proposition
- Create a lean, realistic budget
- Know your financial situation; most lenders in this arena will focus on character (repayment history), capacity (ability to repay loan) & collateral (asset to secure loan)
- Give as much detail as possible and be passionate about your idea
Where to Begin?
- Find out more! Learn about GROW, our resource partners and how our services can help YOUR business by signing up for our FRE1-hour Intro to GROW here. (Prerequisite for all services)
- Take additional classes to develop your plan. Use the Business Model Canvas to outline your businesses who, what, why, when & how! Sign up for Start Smart here. (Prerequisite: Intro to GROW)
- Meet with a business development officer to discuss your idea! Call our office at 616.458.3404 to make an appointment, or contact us online now. (Prerequisite: Intro to GROW)
- Learn more about GROW’s microloan program here.
Let GROW Help You Take the Next Step.
Get involved! View all of GROW’s classes here on our Calendar. Class offerings change each month.