Advantages and disadvantages of Micro-Loans
Micro-loans are usually for $5,000 to $35,000. The loans are often available for start-up businesses.
- The loan process is fast.
- Loan funds are available for start-up business use.
- Minimal required documents: a short business plan and income tax returns (business and personal)
- The loan is usually combined with business training and technical assistance.
Where to find micro-lenders
- Average loan amount is $13,000, which usually is not enough to fund a business
- If funds are used for operating deficits, it makes it harder to become profitable - because the business must pay for
operating expenses plus the loan.
Micro-lenders can be found through at least 5 sources:
- SBA approved micro-lenders
- Check the information in the Funding section of the Tools for local micro-loan programs
- Local CDBG loan funds
- Some communities have used part of their Community Development Block Grants for a business loan program.
Contact your city economic development department for information.
- Local banks and credit unions with small business focus
- Contact your Small Business Development Center to request a list of local micro-lenders. The SBDC will probably ask that
you meet with them first to prepare a business plan. Working with the SBDC will give you a more favorable standing with the micro-lender.
- Accion Microloans
- As a last resort (i.e. you have to exhaust all other sources first), Accion Microloans funds micro-loans.
- Micro-loans usually require some training or one-on-one consulting to strengthen your business skills.
- Many micro-loans require you to send quarterly financial reports to the lender.