Micro funding simply means non-traditional loans in small cash amounts. Finance professionals distinguish them from loans that banks most often find economical. Banks, therefore, require entrepreneurs to take alternative measures to secure them. Micro funding, in other words, is a provision of financial services that’s available to the low-income group. This type of loan helps aspiring entrepreneurs generate income, build assets, manage risks and meet their household needs.
Qualifying for a business loan is no easy feat. You have to provide seemingly endless documentation, and even healthy, well-functioning businesses can be denied. Micro funding encompasses a broad offering of financial services for low-income communities, while micro credit refers specifically to small loans for people below the poverty line. In other words, micro credit is a subset of micro finance. This specialized financing is available through small non-profits organizations as well as larger banks. Here’s what you can do to make sure that you approved for micro funding:
Business Plan
Small businesses only thrive if they can differentiate themselves in competition or markets. Lenders want to see that you take your business seriously and have a plan because they want to work with people who are likely to succeed. Every successful business plan includes a company overview, introduction, mission statement, market and industry analysis, marketing plan, and operations plan.
Have Credit
Even though you currently don’t have a lot of money, good credit makes an excellent impression. Carefully review your credit report, ensuring that it does not have any false information; if it does, send out disputes accordingly.
Personal Guarantee or Collateral
Your personal guarantee is your legal promise to repay the loan. Collateral, such as your house, is something lenders can use against you if you don’t repay it. If you’re confident your business will succeed, offering these two things makes sense so you can get micro funding. When you speak to lenders and are granted a small loan, you can also expect assistance in setting up and maintaining a savings account. A good lender will equip you with the tools to pay back the loan.
Plan Startup Funding Stage
Lenders are unlikely to hand you a loan if you haven’t thought ahead. Your business will need more financing based on certain success metrics. A business owner who puts their own personal investment into their company along with a micro funding shows that they are serious and will make sure their business succeed.
Micro-loans are investment strategies in the finance sector. As a result, entrepreneurs within the space have developed several approaches to the practice. This means there are dozens of options available that could work for you. Many lenders are members of associations that support micro-financing. Here you have a personal touch with the backing of a larger financial body. This adds security and invested interest in your business as well.
